Table 10-4
The following information pertains to the Bank of Moncton.
-Refer to the Table 10-4.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 10-4
The following information pertains to the Bank of Moncton. 
-Refer to the Table 10-4.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 = 25.

Table 10-4 The Following Information Pertains to the Bank of Moncton