The money ____ is 1 divided by the reserve requirement.The larger the reserve requirement, the ____ the money multiplier.

Question

Quizplus · Accepted Answer

The money multiplier is inversely proportional to the reserve requirement, i.e., the larger the reserve requirement, the smaller the money multiplier. This means that as the reserve requirement increases, banks have less money to lend out and therefore the money supply decreases. Therefore, the correct choice is D, multiplier; smaller.

The Money ____ Is 1 Divided by the Reserve Requirement