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Macroeconomics

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Reserve Ratio and Cash Drain Effects on the Money Multiplier

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Which of the following statements is true regarding the money multiplier in fractional reserve banking? Select ALL that apply.

A

An increase in the reserve ratio ($r$) will increase the size of the money multiplier.

B

A decrease in the reserve ratio ($r$) will increase the size of the money multiplier.

C

An increase in the amount of cash drain ($d$) will increase the size of the money multiplier.

D

A decrease in the amount of cash drain ($d$) will increase the size of the money multiplier.