In a Fractional Reserve Banking System, How Does an Increase

question 38

Multiple Choice

In a fractional reserve banking system, how does an increase in the reserve requirement change the money multiplier?

• A) The money multiplier increases by a higher percentage change than the increase in the reserve ratio.
• B) The money multiplier decreases by a higher percentage change than the increase in the reserve ratio.
• C) The money multiplier increases by a lower percentage change than the increase in the reserve ratio.
• D) The money multiplier decreases by a lower percentage change than the increase in the reserve ratio.

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