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Pie
3 years ago
14

The currency drain ratio is 0.5 of deposits and the​ banks' reserve ratio is 0.4. What is the money​ multiplier?

Business
1 answer:
dimaraw [331]3 years ago
3 0

Answer: 1.67

Explanation:

From the question, we are informed that the currency drain ratio is 0.5 of deposits and the​ banks' reserve ratio is 0.4.

The money​ multiplier is calculated as:

(1 + the currency drain ratio)/( the reserve ratio + the currency drain ratio)

= (1 + 0.5)/(0.5 + 0.4)

= 1.5/0.9

= 1.67

Therefore, the money multiplier will be 1.67.

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