If the reserve ratio is 4 percent, then the money multiplier is

a. 25.
b. 2.5.
c. 0.04.
d. 10.

1 answer

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.