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Assume that the required reserve ratio is set at 0.5 . What is the value of the money (deposit) multiplier

User Josh Noe
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4 votes

Answer:

2

Step-by-step explanation:

The term "reserve ratio" may be defined as the the portion of the reservable liabilities which the commercial banks must hold onto, they cannot lend this reserves out or invest this money.

Given that the required reserve ratio is 0.5

Money (deposit) multiplier = 1/Required reserve ratio = 1/0.5 = 2

Thus the money multiplier value should be 2.

User Regeme
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