Answer to Question #222257 in Economics of Enterprise for fadfa

Question

If the required reserve ratio (RR) for a bank is 0.81

, and banks lend out all excess reserves, what is the money multiplier (MM)? Round to one decimal place.

Answer 1

Money multiplier$=\frac1{reserve ratio}$

$=\frac1{0.81}$ $=1.235$ $=1.2$