Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r }
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information.If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be:
A) 5.
B) 8.
C) 10.
D) 20.

Question

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } 
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information.If Moolah Bank is legally "loaned up," the banking system's monetary multiplier must be:
A) 5.
B) 8.
C) 10.
D) 20.

Quizplus · Accepted Answer

If Moolah Bank is legally "loaned up," it means that it has loaned out all its excess reserves, leaving no room for further loans. In such a scenario, the bank's reserve ratio is zero, and the monetary multiplier is equal to the reciprocal of the reserve ratio. Therefore, the monetary multiplier would be 1/0=undefined. However, assuming a reserve ratio of 10%, the monetary multiplier would be 1/0.1 = 10.

Answer the Question on the Basis of the Following Information