If the reserve ratio is RR,the simple deposit multiplier is defined as
C) × change in bank reserves
D) × change in bank reserves

Question

If the reserve ratio is RR,the simple deposit multiplier is defined as
C) × change in bank reserves 
D) × change in bank reserves

Quizplus · Accepted Answer

The simple deposit multiplier is defined as 1/RR, where RR is the reserve ratio. Therefore, the correct formula is 1/RR × change in bank reserves, which is equivalent to option B. The other options are incorrect formulas or do not correspond to the concept of the simple deposit multiplier.

If the Reserve Ratio Is RR,the Simple Deposit Multiplier Is