The smaller the reserve requirement, the larger the money multiplier.

Name: The smaller the reserve requirement, the larger the money multiplier.
Brand: Quizplus
Rating: 5.0 (36 reviews)

Question

Quizplus · Accepted Answer

A smaller reserve requirement means banks are required to hold less of their deposits in reserve, allowing them to lend out a greater portion of their deposits. This increases the money supply through the creation of new deposits from loans, thereby increasing the money multiplier effect.

The Smaller the Reserve Requirement, the Larger the Money Multiplier