Question

Banks in Ruritania have a required reserve ratio of 5%5% . Round all answers to one place after the decimal. What is the simple money multiplier

Answer 1

The simple money multiplier forb the banks is given as 20.

How to solve for the money multiplier

The increase in the supply of money is what is called the money multiplier. This is used to determine the supply of money in an economy because it is known to have an effect on the interest rate of the economy.

The formula for the simple money multiplier is given as;

1/R

Where R is the Required reserve ratio

In the question the given reserved ration is said to be 5%

Hence the calculation would be

1/5%

= 1/0.05

= 20

The simple money multiplier is given as 20

Read more on money multiplier here: brainly.com/question/13988758

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