Maymay4551 Maymay4551
  • 12-06-2018
  • Business
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When the required reserve ratio is 20 percent, the money multiplier is?

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prasanna2
prasanna2 prasanna2
  • 12-06-2018
Formula for money multiplier is :
[tex]money \: multiplier \: = 1 \div reserve \: ratio[/tex]
thus
reserve ratio= 20% = 0.20
money multiplier = 1÷0.20= 5

Money multiplier shows the extent to which the money supply is affected by any change in the deposit amount.
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