A reserve requirement of 5 percent implies a potential money deposit multiplier of
A) 5.
B) 10.
C) 20.
D) 25.

Name: A reserve requirement of 5 percent implies a potential money deposit multiplier of A) 5. B) 10. C) 20. D) 25.
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Question

Quizplus · Accepted Answer

The money deposit multiplier is calculated as the reciprocal of the reserve requirement ratio. With a reserve requirement of 5 percent (or 0.05), the multiplier is 1/0.05, which equals 20.

A Reserve Requirement of 5 Percent Implies a Potential Money