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

Question

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.