If actual reserves in the banking system are $50,000, excess reserves are $5,000, and checkable deposits are $225,000, then the monetary multiplier is
A) 10.
B) 4.
C) 5.
D) 2.

Question

Quizplus · Accepted Answer

The monetary multiplier is equal to 1/required reserve ratio. In this case, the required reserve ratio is (225,000-5,000)/50,000 = 4.4. Therefore, the monetary multiplier is 1/4.4 ≈ 5.

If Actual Reserves in the Banking System Are $50,000, Excess