Multi-part question:

Banks in Ruritania have a required reserve ratio of8. Round all answers to one place after thedecimal. What is the simple moneymultiplier?

A.) simple moneymultiplier: __________________

Money leakages, however, are quite high. Required reserves and leakages amount to40%of deposits. What is the leakage-adjusted moneymultiplier?

A.) leakageadjusted moneymultiplier: ________________

If a financial crisis develops in Ruritania, with numerous loans going into default, is the money multiplier likely to increase ordecrease?

A.) Increase

B.) Decrease

Which example does not represent a leakage from the money multiplierprocess?

A.) cash held byindividuals

B.) cash held by theFed

C.) cash held byforeigners

D.) excess reserves