If the required reserve ratio is RR,the simple deposit multiplier is defined as
C) × change in bank reserves.
D) × change in bank reserves.

Question

If the required reserve ratio is RR,the simple deposit multiplier is defined as
C) × change in bank reserves. 
D) × change in bank reserves.

Quizplus · Accepted Answer

The simple deposit multiplier is defined as 1/RR. So, the correct formula is:
simple deposit multiplier = 1/RR
= 1/0.1 (assuming a required reserve ratio of 10%)
= 10
Therefore, the correct answer is B. Option A is incorrect as it does not correspond to any valid formula. Option C and D are incorrect as they include an additional variable "change in bank reserves" which is not used in the calculation of the simple deposit multiplier.

If the Required Reserve Ratio Is RR,the Simple Deposit Multiplier