if the reserve requirement was so low that no bank felt it was a constraint then a. the arithmetic that produced the monetary base multiplier would be invalidated by the uncertainty surrounding the feds balance sheet. b. the monetary base multiplier would have to be infinity and all monetary control would be destroyed c. the relationship between currency and demand deposits would be too uncertain to allow an accurate calculation of the monetary base multiplier d. the relationship between reserves and deposits would be s uncertain that the ability of the central bank to control the money supply through the monetary base would be severely hampered.
if the reserve requirement was so low that no bank felt it was a constraint then a. the arithmetic that produced the monetary base multiplier would be invalidated by the uncertainty surrounding the feds balance sheet. b. the monetary base multiplier would have to be infinity and all monetary control would be destroyed c. the relationship between currency and demand deposits would be too uncertain to allow an accurate calculation of the monetary base multiplier d. the relationship between reserves and deposits would be s uncertain that the ability of the central bank to control the money supply through the monetary base would be severely hampered.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- if the reserve requirement was so low that no bank felt it was a constraint then
a. the arithmetic that produced the monetary base multiplier would be invalidated by the uncertainty surrounding the feds balance sheet.
b. the monetary base multiplier would have to be infinity and all monetary control would be destroyed
c. the relationship between currency and demand deposits would be too uncertain to allow an accurate calculation of the monetary base multiplier
d. the relationship between reserves and deposits would be s uncertain that the ability of the central bank to control the money supply through the monetary base would be severely hampered.
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