Question

If the reserve requirement is 20 percent, the monetary multiplier will be

nteger, decimal, or E notation allowed

Answer 1

The monetary multiplier is calculated using the formula:

\[
\text{Monetary Multiplier} = \frac{1}{\text{Reserve Requirement}}
\]

In this case, the reserve requirement is 20 percent, which can be expressed as a decimal:

\[
\text{Reserve Requirement} = 20\% = 0.20
\]

Now, substituting the value into the formula:

\[
\text{Monetary Multiplier} = \frac{1}{0.20} = 5
\]

Therefore, the monetary multiplier will be **5**.