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16 September, 11:05

If the reserve ratio is 10 percent, the money multiplier is

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  1. 16 September, 11:24
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    Reserve ratio is the percentage of deposits that bank must have in liquid services.

    With each dollar of reserves banks generate money. The amount of money they generate is called money multiplier. For example, if a bank gains deposits of £1 million and this leads to a final money supply of £10 million, then the money multiplier is 10.

    If ther eserve ratio is 10%., then the money multiplier is 1/0.10 = 10.
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