Read the two statements and choose the correct option.
I. A fall in the reserve ratio raises the money multiplier.
II. The money multiplier works in reverse when deposits are withdrawn from banks.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

1 ÷ r rises as r falls. I is true.
A withdrawal cuts reserves, so banks must cut loans by a multiple of it. II is true.

Ten questions from Money Creation by Banks, at your own pace.

Ten questions from Money Creation by Banks, at your own pace.

Read the two statements and choose the correct option.I. A fall in the reserve ratio raises the money multiplier.II. The money multiplier works in reverse when deposits are withdrawn from banks.