If the reserve ratio is 8 percent,then an additional $800 of reserves can increase the money supply by as much as
A)$6,400.
B)$8,000.
C)$12,500.
D)$10,000.

Name: If the reserve ratio is 8 percent,then an additional $800 of reserves can increase the money supply by as much as A)$6,400. B)$8,000. C)$12,500. D)$10,000.
Brand: Quizplus
Rating: 4.8 (38 reviews)

Question

Quizplus · Accepted Answer

The money multiplier is the reciprocal of the reserve ratio, which is 1/0.08 = 12.5. Therefore, $800 of reserves can increase the money supply by $800 * 12.5 = $10,000.

If the Reserve Ratio Is 8 Percent,then an Additional $800