Question

if the federal reserve decreases the reserve rate from 10% to 8%, how does this affect the amount of money that would result because of fractional reserve banking from an initial deposit into the bank of $40,000

Answer 1

40,000 divided by 0.08= 500,000

40,000 divided by 0.10= 400,000

So...

500,000- 400,000= $100,000

Answer is:

$100,000

Increases by $100,000.

Hope this helps, have a good day. c;