In order for the simple money multiplier to work we assume t

In order for the simple money multiplier to work we assume that 1) banks loan all their excess reserves. 2) all loans a fully redeposited into the banking system. 3) there are no taxes in the economy. 4) all of the above. 5) Both a and b.

Solution

Ans

4 is right. I. E all statements are true. Banks are assumed to have no excess reserves. Funds don\'t leak from banking system Taxes may reduce its impact but they are viewed as zero