1.7 Why is the real-world deposit multiplier smaller than 1/RR, where RR is the requiredreserve ratio?1.8 According to the quantity theory of money, if the money supply is growing at a rate of 5percent, real GDP is growing at a rate of 2 percent, and velocity is constant, what will theinflation rate be?

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1.7 Why is the real-world deposit multiplier smaller than 1/RR, where RR is the required reserve ratio?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter13: The Federal Reserve System

Section: Chapter Questions

Problem 5WNG

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Question

1.7 Why is the real-world deposit multiplier smaller than 1/RR, where RR is the required
reserve ratio?
1.8 According to the quantity theory of money, if the money supply is growing at a rate of 5
percent, real GDP is growing at a rate of 2 percent, and velocity is constant, what will the
inflation rate be?

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