If m equals the maximum number of new dollars that can be created for a single dollar of excess reserves and R equals the required reserve ratio, then for the banking system,
A) m = R ? 1.
B) $R = m / 1$
C) R = m ? 1.
D) $m = 1 / R$

Question

Quizplus · Accepted Answer

The formula for calculating the maximum amount of new money that can be created in the banking system is given as m = 1/R, where R is the reserve ratio. This means that for every $1 of excess reserves held in the banking system, a maximum of $m can be created through the process of lending and deposit creation. Therefore, the correct choice is D.

If M Equals the Maximum Number of New Dollars That R=m/1R = m / 1R=m/1

If M Equals the Maximum Number of New Dollars That $R = m / 1$