In Australia for the M3 definition of money, the currency drain ratio was 3.6 per cent and the banks' reserve ratio was 1.6 per cent. So the money multiplier was about
A) 20.
B) 1.
C) 5.
D) 10.
E) 23.

Question

Quizplus · Accepted Answer

The money multiplier is calculated as 1 / (currency drain ratio + banks' reserve ratio). In this case, the money multiplier is 1 / (0.036 + 0.016) = 20.

In Australia for the M3 Definition of Money, the Currency