Assuming all excess reserves are loaned out, if the reserve ratio is 25 percent, the money multiplier will be equal to
A) 0.5.
B) 2.5.
C) 4.
D) 5.

Question

Quizplus · Accepted Answer

The simple formula to calculate the money multiplier is: 
Money Multiplier = 1 / Reserve Ratio

Here, the reserve ratio is given as 25%, which can also be written as 0.25 in decimal form. So, substituting this value in the formula, we get:

Money Multiplier = 1 / 0.25 = 4

Therefore, the correct answer is option C) 4.

Assuming All Excess Reserves Are Loaned Out, If the Reserve