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

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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