Table 10-3
The following information pertains to the Bank of Edmonton.

-Refer to the Table 10-3.Assume that the Bank of Edmonton is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves,and that people hold only deposits and no currency.What is the money multiplier?
A)1
B)5
C)10
D)15

Question

Table 10-3
The following information pertains to the Bank of Edmonton.
 
-Refer to the Table 10-3.Assume that the Bank of Edmonton is holding the required percent of deposits as reserves.Also,assume all other banks hold only the required percent of deposits as reserves,and that people hold only deposits and no currency.What is the money multiplier?
A)1 
B)5 
C)10 
D)15

Quizplus · Accepted Answer

The money multiplier is calculated as the reciprocal of the reserve ratio. If banks hold only the required reserves, and assuming the reserve ratio is 10%, the money multiplier would be 1/0.10 = 10.

Table 10-3 The Following Information Pertains to the Bank of Edmonton