Question
f the reserve requirement is 20 percent, the monetary multiplier will be 4:
True
False
True
False
Answers
GPT-4o mini
True.
The monetary multiplier is calculated as the inverse of the reserve requirement ratio. If the reserve requirement is 20 percent (or 0.20), the monetary multiplier (MM) can be calculated as follows:
\[
MM = \frac{1}{\text{Reserve Requirement}} = \frac{1}{0.20} = 5
\]
However, the statement says the monetary multiplier is 4. Therefore, the correct answer is **False**.
The monetary multiplier is calculated as the inverse of the reserve requirement ratio. If the reserve requirement is 20 percent (or 0.20), the monetary multiplier (MM) can be calculated as follows:
\[
MM = \frac{1}{\text{Reserve Requirement}} = \frac{1}{0.20} = 5
\]
However, the statement says the monetary multiplier is 4. Therefore, the correct answer is **False**.