Suppose the required reserve ratio is 20 percent.If banks are conservative and choose not to loan all of their excess reserves,the real-world deposit multiplier is

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The real-world deposit multiplier is calculated as 1/required reserve ratio (1/0.20=5). However, banks may choose to hold excess reserves for various reasons such as uncertainty in the economy or lack of demand for loans. If banks are conservative and choose not to loan all of their excess reserves, the deposit multiplier will be lower than the theoretical maximum of 5. Therefore, the correct answer is A) less than 5.

Suppose the Required Reserve Ratio Is 20 Percent