The multiple by which the chartered banking system can increase the supply of money on the basis of each dollar of excess reserves is equal to:
A)the reciprocal of the desired reserve ratio.
B)1 minus the desired reserve ratio.
C)the reciprocal of the income velocity of money.
D)1/MPS.

Question

Quizplus · Accepted Answer

The money multiplier is the reciprocal of the reserve ratio, which determines how much the money supply can increase based on excess reserves.

The Multiple by Which the Chartered Banking System Can Increase