The money multiplier will decrease if the currency drain ratio
A)increases or the desired reserve ratio increases.
B)decreases or the desired reserve ratio decreases.
C)decreases or the desired reserve ratio increases.
D)increases or the desired reserve ratio decreases.
E)decreases and the monetary base increases.

Question

Quizplus · Accepted Answer

The money multiplier is inversely related to the currency drain ratio and the desired reserve ratio. Therefore, if either of these increases, the money multiplier will decrease.

The Money Multiplier Will Decrease If the Currency Drain Ratio