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Chapter 15: Q1. (page 319)

A goldsmith has \(2 million of gold in his vaults. He issues \)5 million in gold receipts. His gold holdings are what fraction of the paper money (gold receipts) he has issued?

  1. 1/10

  2. 1/5

  3. 2/5

  4. 5/5

Short Answer

Expert verified

The correct answer is c. 2/5. Goldsmith's gold holdings are a 2/5 fraction of the paper money he has issued.

Step by step solution

01

Explanation

The holding with the goldsmith will equal the fraction of the outstanding gold receipt.

The goldsmith has $2 million worth of gold and issues $5 million worth of gold receipts per the question. Thus, the money in circulation will equal $5 million.

The fraction of his holdings will be equal to the amount of gold upon the total gold receipts issue as shown below:

His holdings = Gold amount / issued gold receipts

His holdings = $2 million/ $5 million

Thus, the fraction is 2/5.

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