What is the monetary multiplier?multiple choicereserve ratio - 11- reserve ratio1 + reserve ratio1 / reserve ratio

Break Down the Problem

1. Identify the concept: The question is regarding the monetary multiplier in the context of banking and economics.
2. Analyze the given options: Understand what each option signifies concerning the reserve ratio.

Relevant Concepts

1. The monetary multiplier (also known as the money multiplier) is a factor that quantifies the maximum amount of money that can be created in an economy based on a given level of reserves.
2. The formula for calculating the monetary multiplier is given by:

$\text{Monetary Multiplier} = \frac{1}{\text{Reserve Ratio}}$

Analysis and Detail

1. Option Breakdown:

   • Reserve Ratio - This is a banking term that refers to the fraction of deposits that a bank must hold as reserves.
   • Reserve Ratio 1 - This expression is ambiguous but seems to refer to the value of the reserve ratio.
   • Reserve Ratio - 1 - Would not make sense in terms of calculating the multiplier directly.
   • Reserve Ratio 1 / Reserve Ratio - This also simplifies incorrectly as it would lead to a fraction.

2. The correct understanding aligns with the first expression of the monetary multiplier being the reciprocal of the reserve ratio.

Verify and Summarize

After examining the possible options and understanding the foundational concept, we see that the ideal theory dictates:

• The multiplier is indeed determined simply by $\frac{1}{\text{Reserve Ratio}}$.
• Therefore, none of the provided options seem to represent the monetary multiplier correctly.

Final Answer

The correct expression for the monetary multiplier is $\frac{1}{\text{Reserve Ratio}}$.