The ________ the reserve ratio,the ________ the money multiplier.

Question

Quizplus · Accepted Answer

The reserve ratio is the proportion of deposits that banks are required to hold in reserve. The higher the reserve ratio, the less money banks can lend out, resulting in a smaller money multiplier. Conversely, lower reserve ratios mean banks can lend out more money, resulting in a larger money multiplier. Therefore, as the reserve ratio decreases, the money multiplier increases. So, option B, smaller reserve ratio implies a larger money multiplier, is correct.

The ________ the Reserve Ratio,the ________ the Money Multiplier

The the Reserve Ratio,the the Money Multiplier