If the reserve ratio is 100 percent, the maximum potential money multiplier is

Name: If the reserve ratio is 100 percent, the maximum potential money multiplier is
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Question

Quizplus · Accepted Answer

When the reserve ratio is 100 percent, banks must hold all deposits as reserves and cannot lend out any money, meaning the money supply cannot be expanded through the banking system. Therefore, the maximum potential money multiplier is 1, as each deposit can only support an equivalent amount of money in the economy.

If the Reserve Ratio Is 100 Percent, the Maximum Potential