The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves
A) is larger, the smaller the required reserve ratio.
B) is the reciprocal of the bank's actual reserves.
C) is directly or positively related to the size of the required reserve ratio.
D) will be zero when the required reserve ratio is 100 percent.

Question

Quizplus · Accepted Answer

The multiple by which the commercial banking system can expand the supply of money on the basis of excess reserves is calculated as 1/required reserve ratio. Therefore, the smaller the required reserve ratio, the larger the multiple.

The Multiple by Which the Commercial Banking System Can Expand