If the currency drain ratio is 30 percent and the desired reserve ratio is 10 percent, the money
Multiplier is
A)1.25.
B)10.0.
C)0.80.
D)3.25.
E)5.00.

Question

Quizplus · Accepted Answer

The money multiplier is calculated as 1 / (currency drain ratio + desired reserve ratio), which is 1 / (0.30 + 0.10) = 1 / 0.40 = 2.5. However, this calculation seems incorrect for the given options. The correct calculation should consider the formula for the money multiplier in the presence of a currency drain: (1 + currency drain ratio) / (currency drain ratio + desired reserve ratio) = (1 + 0.30) / (0.30 + 0.10) = 1.30 / 0.40 = 3.25.

If the Currency Drain Ratio Is 30 Percent and the Desired