If banks increase their reserve ratios, the deposit multiplier increases.

Name: If banks increase their reserve ratios, the deposit multiplier increases.
Brand: Quizplus
Rating: 4.9 (35 reviews)

Question

Quizplus · Accepted Answer

If banks increase their reserve ratios, it means that they are keeping a higher percentage of deposits as reserves and lending out less. This decreases the deposit multiplier as less money is available for lending and creating new deposits. Therefore, the statement is false.

If Banks Increase Their Reserve Ratios, the Deposit Multiplier Increases