The money multiplier equals
A)1/R,where R represents the quantity of reserves in the economy.
B)1/R,where R represents the reserve ratio for all banks in the economy.
C)1/(1+R),where R represents the quantity of reserves in the economy.
D)1/(1+R),where R represents the reserve ratio for all banks in the economy.

Question

Quizplus · Accepted Answer

The money multiplier is calculated as 1 divided by the reserve ratio (R), which is the fraction of deposits that banks are required to hold as reserves.

The Money Multiplier Equals