If the reserve requirement is 10%, then the potential money multiplier is _____ and the actual money multiplier is _____.
A) 10; greater than 10
B) 100; greater than 100
C) 10; less than 10
D) 100; less than 100

Question

Quizplus · Accepted Answer

The potential money multiplier is calculated as the reciprocal of the reserve requirement ratio, which is 1/0.10 = 10. The actual money multiplier is typically less than the potential multiplier due to factors like currency holdings and excess reserves.

If the Reserve Requirement Is 10%, Then the Potential Money