5. The simple money multiplier Suppose that the Federal Reserve ("the Fed") buys $50,000 of U.S. government bonds and the required reserve ratio is 0.20. If the assumptions of the simple money multiplier hold, this will the money supply by Which of the following assumptions is necessary for the simple money multiplier to be applicable? People's marginal propensity to consume does not rise with income. The amount of cash people want to hold doesn't change when the money supply changes. Borrower default rates are stable. If the correct assumption did not hold, the change in the money supply would be describes why this holds true? than you previously found. Which of the following If people kept some of the new money as cash rather than depositing it in another bank, this cash could not in turn become a bank loan. If borrower default rates were not stable, then the money creation process would be disrupted. If people's marginal propensity to consume rose with income, they would save less, removing money from the financial system. A-Z bongo

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