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

Question

Quizplus · Accepted Answer

The potential money multiplier is calculated as 1/reserve requirement, which in this case is 1/0.1=10. However, the actual money multiplier will depend on other factors such as the willingness of banks to lend and the demand for credit in the economy, and may be equal to or less than 10.

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