If the reserve ratio is 12.5 percent,then $5,600 of money can be generated by
A)$64 of new reserves.
B)$448 of new reserves.
C)$700 of new reserves.
D)$800 of new reserves.

Name: If the reserve ratio is 12.5 percent,then $5,600 of money can be generated by A)$64 of new reserves. B)$448 of new reserves. C)$700 of new reserves. D)$800 of new reserves.
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Question

Quizplus · Accepted Answer

The money multiplier is 1 divided by the reserve ratio, so 1/0.125 = 8. To generate $5,600, you need $5,600 / 8 = $700 of new reserves.

If the Reserve Ratio Is 12