A reserve requirement of 20 percent implies a potential money deposit multiplier of
A) 4.
B) 5.
C) 20.
D) 25.

Name: A reserve requirement of 20 percent implies a potential money deposit multiplier of A) 4. B) 5. C) 20. D) 25.
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Question

Quizplus · Accepted Answer

The potential money deposit multiplier is equal to 1/required reserve ratio. Therefore, for a reserve requirement of 20%, the potential money deposit multiplier would be 1/0.20, which equals 5.

A Reserve Requirement of 20 Percent Implies a Potential Money