Table 29-5 The following information pertains to the Bank of Kingston.

-Refer to Table 29-5. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?
A)5
B)10
C)15
D)25

Question

Table 29-5 The following information pertains to the Bank of Kingston.
 
-Refer to Table 29-5. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?
A)5 
B)10 
C)15 
D)25

Quizplus · Accepted Answer

The money multiplier is calculated as 1 divided by the reserve ratio. With a reserve ratio of 4%, the money multiplier is 1/0.04, which equals 25.

Table 29-5 the Following Information Pertains to the Bank of Kingston