If we assume m to be equal to the maximum amount of dollar that can be created from a single dollar of excess reserves and R to be equal to the desired reserve ratio, then we can say that for the banking system:
A)m = R - 1.
B)R = m/1.
C)R = m - 1.
D)m = 1/R.

Question

Quizplus · Accepted Answer

The formula for calculating the maximum amount of money that can be created from a single dollar of excess reserves is given by the equation m = 1/R. Therefore, option D is correct.

If We Assume M to Be Equal to the Maximum