Explanation:
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Answer:
See below.
Explanation:
To compute the change in money supply, we first calculate the credit multiplier,
Credit multiplier is calculated as,
Multiplier = 1 / reserve ratio
When the Bank of Tazi loans 10 million to bank while their reserve requirements stay the same, this additional 10 million will be loaned out and the total change in money supply would be
= 10 million * Multiplier
For example if the reserve ratio was 4% then the multiplier = 1 /0.04 = 25
Then the total change in money supply would be 10 * 25 = 250 million.
Hope that helps.
Answer: Monetary unit assumption
Explanation: The monetary unit of assumption states that every transaction of the business can be expresses in relation to monetary units and these units will be stable over time. The key point in this assumption is that it assumes monetary units to be stable and dependable.
In the given case, Lawton records transactions in dollars and disregards changes in value of dollars over time. Hence, we can conclude that Lawton is following monetary unit assumption.