In the special case of the 100-percent-reserve banking, the money multiplier is
A)1 and banks create money.
B)1 and banks do not create money.
C)2 and banks create money
D)2 and banks do not create money.

Question

Quizplus · Accepted Answer

In a 100-percent-reserve banking system, banks do not create money; they simply store it. Therefore, the money multiplier is 1, as each deposit leads to an equal amount of reserves.

In the Special Case of the 100-Percent-Reserve Banking, the Money