Question

Statistics

Posted 6 months ago

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The nation of Kocherlakota has a money supply equal to $\$ 10,000$ and a monetary base equal to $\$ 2,500$.
What is the money multiplier in Kocherlakota?
Choose 1 answer:
(A) 2.5
(B) 0.25
(C) 4
(D) This cannot be determined without knowing the reserve requirement
(E) $\$ 7500$
```

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Answer from Sia

Posted 6 months ago

Solution by Steps

step 1

The money multiplier is defined as the ratio of the money supply ($M$) to the monetary base ($B$), which is given by the formula: $Money\ Multiplier = \frac{M}{B}$

step 2

Substitute the given values into the formula: $Money\ Multiplier = \frac{\$10,000}{\$2,500}$

step 3

Calculate the money multiplier: $Money\ Multiplier = 4$

Answer

The money multiplier in Kocherlakota is 4.

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Provide the most correct one answer choice letter strictly in the following format enclosed by *
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`*C*`

`Key Concept∻ `

Money Multiplier

Explanation

The money multiplier is the ratio of the money supply to the monetary base, indicating how much the money supply will increase for each dollar increase in the monetary base.

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