Question

Which of the following is not true?

A.The money multiplier is the measure of the amount of money ultimately created per dollar deposited in the banking system, when people hold no currency It tells us how much money will ultimately be created by the banking system from an initial inflow of money
B.The higher the reserve ratio, the smaller the money multiplier, and the more money will be created
c.The money multiplier is 1/R

Answer 1

B) The higher the reserve ratio, the smaller the money multiplier, and the more money will be created

Step-by-step explanation:

The first part is true, the higher the reserve ratio, the smaller the money multiplier. The formula for the money multiplier equals 1 / r.

The second part of the sentence is wrong. If the money multiplier is small, then the amount of money "created" by banks will also be small.