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) $\$ 7500$

Question

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) $\$ 7500$

Accepted Answer

∻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. ‖ Provide the most correct one answer choice letter strictly in the following format enclosed by *** ***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.⚹◊What is the formula for calculating the money multiplier in Kocherlakota?⍭ Generate me a similar question◊

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