Question 30
EasyOriginal questionWith a reserve ratio r and no cash held back by the public, the money multiplier is
Show the answer and explanation
CorrectNot quiteAnswer C
Correct answer: C
Explanation
Total deposits = initial deposit × 1 ÷ r.
Worth noting
1 ÷ (1 − r) looks like the investment multiplier formula, which uses the MPC; here the leak is r.
- Concept
- Money multiplier
- Typical timeTypical
- 40 s
- Your timeYours
- —
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