Whether the money multiplier will increase or decrease

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Reference no: EM131210319

In each of the following fictitious examples, tell whether the money multiplier will increase, decrease, or stay the same:

a. Depositors become concerned about the safety of depository institutions, and there is no deposit insurance.

b. Depository institutions do not see any creditworthy borrowers.

c. The Fed lowers the required reserve ratio.

d. Larger amounts of currency are demanded by the public to use in the "underground economy."11

e. Depository institutions believe that overall default risk has decreased.

Reference no: EM131210319

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