If the reserve requirement is 2.5%, the potential money multiplier is
A) 0.025.
B) 2.5.
C) 4.
D) 40.

Name: If the reserve requirement is 2.5%, the potential money multiplier is A) 0.025. B) 2.5. C) 4. D) 40.
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Question

Quizplus · Accepted Answer

The potential money multiplier is calculated as 1 divided by the reserve requirement ratio. Therefore, with a reserve requirement of 2.5% (or 0.025 as a decimal), the potential money multiplier is 1 / 0.025 = 40.

If the Reserve Requirement Is 2