In recent years,the U.S.banking industry's equity multiplier has generally risen in response to regulatory pressure to raise more capital.

Question

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The equity multiplier is a measure of financial leverage, calculated as total assets divided by total shareholders' equity. If the banking industry were under regulatory pressure to raise more capital, we would expect the equity multiplier to decrease, not rise, because raising more capital increases shareholders' equity, which in turn would lower the equity multiplier assuming total assets remain constant or don't increase at the same rate.

In Recent Years,the U