-Refer to Table 10-4. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?
A) 5
B) 10
C) 15
D) 25

Name: -Refer to Table 10-4. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier? A) 5 B) 10 C) 15 D) 25
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Question

-Refer to Table 10-4. If all banks hold only the required 4 percent of deposits as reserves, then what is the money multiplier?
A) 5 
B) 10 
C) 15 
D) 25

Quizplus · Accepted Answer

The money multiplier is calculated as the reciprocal of the reserve ratio. If the reserve ratio is 4%, the money multiplier is 1/0.04, which equals 25.