If the reserve ratio for all banks is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as

Name: If the reserve ratio for all banks is 8 percent,then an additional $1,000 of reserves can increase the money supply by as much as
Brand: Quizplus
Rating: 4.9 (47 reviews)

Question

Quizplus · Accepted Answer

The money multiplier is the reciprocal of the reserve ratio. With a reserve ratio of 8%, the money multiplier is 1/0.08 = 12.5. Therefore, $1,000 of reserves can increase the money supply by $1,000 * 12.5 = $12,500.

If the Reserve Ratio for All Banks Is 8 Percent,then