Question

Suppose that the required reserve ratio is 8%. What is the simple money (deposit) multiplier? Round to two decimal places.Increasing the reserve ratio will _____ the multipliera. increaseb. decrease

Answer 1

Answer: Money multiplier is 12.50

Explanation: Money Multiplier is the amount of cash to be reserved.

It is calculated thus: 1/r where r is the rate

= 1/0.08= 12.50

Increasing the reserve ration will decrease the multiplier.