The ________ the reserve ratio, the ________ the money multiplier.

Question

Quizplus · Accepted Answer

The reserve ratio and money multiplier have an inverse relationship. When the reserve ratio is smaller, banks are required to hold less of their deposits in reserve, meaning they can lend out more money, resulting in a larger money multiplier. When the reserve ratio is larger, banks are required to hold more of their deposits in reserve, meaning they can lend out less money, resulting in a smaller money multiplier.

The ________ the Reserve Ratio, the ________ the Money Multiplier

The the Reserve Ratio, the the Money Multiplier