The required reserve ratio is 10%. If the banks hold excess reserves, then the money multiplier is:

Question

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The money multiplier is the inverse of the required reserve ratio. Since the required reserve ratio is 10%, the initial money multiplier is 1/0.1 = 10. If banks hold excess reserves, it means that they are keeping additional funds that they could use to make loans. As a result, the actual amount of money created by the banking system will be less than what the initial money multiplier suggests. Therefore, the money multiplier will be less than 10.

The Required Reserve Ratio Is 10