$$\begin{array} { | l | c | }
\hline \text { Reserves } & \$ 100 \
\hline \text { Checkable Deposits } & 1,000 \
\hline \text { Loans (to customers) } & 300 \
\hline \text { Property } & 400 \
\hline \text { Securities (owned) } & 300 \
\hline \text { Stock Shares } & 100 \
\hline
\end{array}$$ Refer to the accompanying table of information for the Moolah Bank. If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be
A) 5.
B) 8.
C) 10.
D) 20.

Question

$$\begin{array} { | l | c | } 
\hline \text { Reserves } & \$ 100 \
\hline \text { Checkable Deposits } & 1,000 \
\hline \text { Loans (to customers) } & 300 \
\hline \text { Property } & 400 \
\hline \text { Securities (owned) } & 300 \
\hline \text { Stock Shares } & 100 \
\hline
\end{array}$$ Refer to the accompanying table of information for the Moolah Bank. If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be
A) 5.
B) 8.
C) 10.
D) 20.

Quizplus · Accepted Answer

The monetary multiplier is equal to 1/ Reserve ratio. Since Moolah Bank is "loaned up," all of its reserves are held as required reserves, which implies a reserve ratio of 10% (100/1,000). Therefore, the monetary multiplier is 1/0.1 = 10.

Refer to the Accompanying Table of Information for the Moolah