China Cuts Reserve Requirements Beijing—China's central bank reduced the amount of reserves commercial banks are required to hold, freeing up money for lending in the latest easing measure to shore up the world's second-largest economy. The People's Bank of China's percentage point cut in the reserve requirement lowers the reserve-requirement ratio, or RRR, to 11.5 percent for large banks. The move frees up about US$79 billion in additional funds that banks can now lend. What was the money multiplier in China before the change in reserve requirements?
| China Cuts Reserve Requirements |
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Beijing—China's central bank reduced the amount of reserves commercial banks are required to hold, freeing up money for lending in the latest easing measure to shore up the world's second-largest economy. |
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The People's Bank of China's percentage point cut in the reserve requirement lowers the reserve-requirement ratio, or RRR, to 11.5 percent for large banks. The move frees up about US$79 billion in additional funds that banks can now lend. What was the money multiplier in China before the change in reserve requirements? |
A multiplier can be defined as an economic factor that, when changed, result to changes in several other related economic variables. The money multiplier will be computed as 1/r where r means the reserve ratio.
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