If the reserve ratio for all banks is 12.5 percent,then $2,000 of additional reserves can create up to

Name: If the reserve ratio for all banks is 12.5 percent,then $2,000 of additional reserves can create up to
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The money multiplier formula is 1/RR, where RR is the reserve ratio. So, with a reserve ratio of 12.5 percent (or 0.125), the money multiplier is 1/0.125 = 8. Therefore, $2,000 of additional reserves can create up to $16,000 (or 8 times $2,000) of new money.

If the Reserve Ratio for All Banks Is 12