Table 11-5.

-Refer to Table 11-5. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?
A) 5
B) 10
C) 15
D) 20

Question

Table 11-5.
 
-Refer to Table 11-5. Assume there is a reserve requirement and the Bank of Pleasantville is exactly in compliance with that requirement. Assume the same is true for all other banks. Lastly, assume people hold only deposits and no currency. What is the money multiplier?
A) 5 
B) 10 
C) 15 
D) 20

Quizplus · Accepted Answer

The money multiplier is calculated as 1/reserve requirement ratio. In this case, the reserve requirement ratio is 10%, so the money multiplier is 1/0.1 = 10.

Table 11-5. -Refer to Table 11-5. Assume There Is a Reserve Requirement