Refer to the information below.The monetary multiplier is:
Consolidated balance sheet for the chartered banking system.All figures are in billions.Assume that the desired reserve ratio is 20 percent.

Question

Quizplus · Accepted Answer

The monetary multiplier is calculated by dividing 1 by the reserve requirement ratio. In this case, the reserve requirement ratio is 20%, so the monetary multiplier is 1/0.2, which equals 5. Therefore, for every $1 of excess reserves held by banks, the money supply will increase by $5.

Refer to the Information Below.The Monetary Multiplier Is