Correct Answer: 1 / Reserve Ratio
Subject: economics
Explanation: • <b>Key Fact</b> The Money Multiplier reflects how much money banks can generate through lending. The formula is 1 / reserve ratio. • <b>Supporting Detail</b> It is the ratio of total money supply to the base money (high-powered money). • <b>Related Concept</b> Currency Deposit Ratio (CDR) is CU/DD (Currency / Demand Deposits). • <b>Why wrong options are wrong</b> Option A is related to the velocity of money (V = PQ/M). Option D is the Currency Deposit Ratio. • <b>Exam Trick</b> Multiplier is the inverse of the reserve ratio; less reserve means higher multiplication of credit. • <b>Additional Info</b> M0 is the monetary base or high-powered money.
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