Ask Question
3 March, 17:14

If the reserve ratio increased from 5 percent to 10 percent, then the money multiplier would a. rise from 5 to 10. b. fall from 10 to 5. c. fall from 20 to 10. d. rise from 10 to 20.

+4
Answers (1)
  1. 3 March, 19:30
    0
    c. fall from 20 to 10.

    Explanation:

    The formula for the money multiplier is 1/reserve ratio, this means that the lower the reserve ratio the higher the multiplier, the reason for this is when the reserve ratio is lower banks can loan out a higher proportion of money therefore more money is created thus the multiplier and reserve ratio have an inverse relationship.

    when the reserve ratio is 5% the multiplier is 1/0.05=20

    When the reserve ratio is changed to 10% the multiplier is 1/0.1 = 10

    So the multiplier changes from 20 to 10.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “If the reserve ratio increased from 5 percent to 10 percent, then the money multiplier would a. rise from 5 to 10. b. fall from 10 to 5. c. ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers