If the required reserve ratio (RR) is 20 percent, the simple ...

[madam-professor]

If the required reserve ratio (RR) is 20 percent, the simple deposit multiplier is
 
  A) 2. B) 5. C) 10. D) 20.

Question 2

Refer to Table 20-13. Consider a simple economy that produces only three products: tacos, earplugs, and toothbrushes. Use the information in the table to calculate the inflation rate for 2016, as measured by the consumer price index.
 
  What will be an ideal response?

[meltdown117]

Answer to Question 1

B

Answer to Question 2

Total expenditures for 2001 = (5  1.50 ) + (10  6.00 ) + (3  2.50 ) = 75.00.
Total expenditures for 2015 = (5  2.00 ) + (10  7.50 ) + (3  3.50 ) = 95.50.
Total expenditures for 2016 = (5  2.25 ) + (10  7.00 ) + (3  3.50 ) = 91.75.

The CPI for 2015= (95.50/75.00 )  100 = 127.33
The CPI for 2016 = (91.75/75.00 )  100 = 122.33.
So, the inflation rate for 2016 = ((122.33  127.33 )/127.33 )  100 ) = 3.9.

[madam-professor]

YES! Correct, THANKS for helping me on my review

[phuda]

Thanks for the timely response, appreciate it