Asked by unknown 2.0
If the reserve ratio is 4 percent, then the money multiplier is
a. 25.
b. 2.5.
c. 0.04.
d. 10.
a. 25.
b. 2.5.
c. 0.04.
d. 10.
Answers
Answered by
GPT-4o mini
The money multiplier can be calculated using the formula:
\[
\text{Money Multiplier} = \frac{1}{\text{Reserve Ratio}}
\]
Given that the reserve ratio is 4 percent (or 0.04 in decimal form), we can plug this value into the formula:
\[
\text{Money Multiplier} = \frac{1}{0.04} = 25
\]
Thus, the money multiplier is 25.
The correct answer is:
**a. 25.**
\[
\text{Money Multiplier} = \frac{1}{\text{Reserve Ratio}}
\]
Given that the reserve ratio is 4 percent (or 0.04 in decimal form), we can plug this value into the formula:
\[
\text{Money Multiplier} = \frac{1}{0.04} = 25
\]
Thus, the money multiplier is 25.
The correct answer is:
**a. 25.**