If the desired reserve ratio is 25 percent,the maximum money multiplier is

Question

Quizplus · Accepted Answer

The maximum money multiplier can be calculated using the formula:

Money multiplier = 1 / reserve ratio

Therefore, in this case, the maximum money multiplier would be:

Money multiplier = 1 / 0.25 = 4

This means that for every $1 deposited in the bank, the bank can lend out up to $4, which would be created through the multiple rounds of deposit and lending. Therefore, the best choice is option B) 4).

If the Desired Reserve Ratio Is 25 Percent,the Maximum Money