๐Ÿ’ผ Pre-MBA Exam Prep

The money multiplier in banking is calculated as:

A Total deposits
B One divided by the reserve requirement ratio
C Interest rate divided by GDP
D Loans minus reserves

โœ“ Correct Answer: Option B

Simple money multiplier = 1 / reserve requirement ratio. If reserve ratio is 10%, multiplier is 10 โ€” meaning $1 of new reserves can support $10 of new deposits through fractional reserve banking.

๐Ÿ’ก Why is B) the correct answer?

The correct answer to the question "The money multiplier in banking is calculated as:" is Option B: One divided by the reserve requirement ratio.

The other options โ€” A) Total deposits, C) Interest rate divided by GDP, D) Loans minus reserves โ€” are incorrect for this Pre-MBA Exam Prep question. As explained above: Simple money multiplier = 1 / reserve requirement ratio. If reserve ratio is 10%, multiplier is 10 โ€” meaning $1 of new reserves can support $10 of new deposits through fractional reserve banking.

๐Ÿ“š About This Pre-MBA Exam Prep Practice Question

This 3-level Pre-MBA Exam Prep question from the Economics topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free Pre-MBA Exam Prep practice test or use flashcards for spaced repetition review.

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