If the reserve ratio increased from 5 percent to 10 percent, then the money multiplier would...
If the reserve ratio increased from 5 percent to 10 percent, then the money multiplier would
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Homework Answers
Answer
option c
Multiplier =1/reserve ratio
rr=5% then multiplier =1/0.05=20
rr=10% then multiplier =1/0.1=10
the multiplier falls from 20 to 10 as the reserve ratio increases because there is an inverse relationship between rr and multiplier.
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