If the money multiplier is 2, the reserve ratio is:

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The money multiplier is defined as the ratio of the amount of deposits created by banks to the amount of new reserves injected into the banking system. If the money multiplier is 2, it means that for every $1 in new reserves injected into the system, banks are able to create $2 in new deposits. This implies that the reserve ratio, which is the ratio of reserves to deposits that banks are required to hold, is 50 percent. This can be calculated by rearranging the formula for the money multiplier:

Money multiplier = 1 / reserve ratio

2 = 1 / reserve ratio

Reserve ratio = 1 / 2 = 0.5 = 50%

If the Money Multiplier Is 2, the Reserve Ratio Is