Economics: multiple deposit expansion?

Question

If the desired reserve ratio on chequable deposits were set at zero, the amount of multiple deposit expansion would go on indefinitely. Is this statement True/False/Uncertain, Explain.

I really can't find an answer to this question. It seems like the answer is true because the deposits of a bank siphon through other banks but subtract the reserves needed for the reserve ratio. It keeps going until there are no deposits remaining so thats why i'm thinking that if there were no required desired reserves, it would keep on going and going because nothing will be subtracted off.

This seems like a trick question though but I can't figure out any other solution or if there is anything else I can say to back up my claim.

Thanks a lot!

Answer 1

Correct.  Without a required reserve request, the hold back amount is zero.  Everything that goes in can then go out, over and over again and never chew down.

Answer 2

True

R - Reserve requirement

M - Money multiplier

M = 1 / R

Smaller R, leads to greater M.

And if you will take limit of M under R→0 then M→∞