Answer: B. 1/R, where R represents the reserve ratio for all banks in the economy.
Explanation:
The Money Multiplier is the money that Banks generate given a certain RESERVE REQUIREMENT/RATIO.
A Reserve Requirement is money that the Central Bank requires that Banks do not loan out and instead keep in reserve.
For example, if the reserve rate is 10% and a bank has $10 they can only loan out $9.
Assuming they loan out $9 then they created $19 in the economy because their customers still own the original $10 but now they have also given loans of $9. The people who take the loans then deposit it in another bank. That bank would keep $0.90 in reserve and loan out $8.10 meaning that $27.10 now exists in the economy.
The process goes on and on until it gets to $100.
A simpler way to get to the final figure is to divide 1 by the reserve requirement = 1/r which is the money multiplier.
Using the above example, that would be 1/0.1 which is 10.
Multiplying this 10 by the initial deposit of $10 will give you that same $100.
The equity multiplier is obtained by adding one to the debt ratio.
Therefore, the equity multiplier of XYZ inc is given by 1 + 0.62 = 1.62
Answer:
The unit sales to earn the target income is 9,000 units
Explanation:
Annual income=Total sales-total expenses
where;
Annual income=$1,550,000
Total sales=Cost per unit sales×number of units sold (n)=(310×n)=310 n
Total expenses=Variable cost+annual fixed cost
Total expenses=(248×n)+992,000
Total expenses=248 n+992,000
Replacing;
1,550,000=310 n-(248 n+992,000)
1,550,000=310 n-248 n-992,000
310 n-248 n=1,550,000-992,000
62 n=558,000
n=558,000/62
n=$9,000
The unit sales to earn the target income is 9,000 units
