Question

If the Federal Reserve decreases the reserve rate from 4% to 2%, how does this affect the amount of money that would result because of fractional-reserve banking from an initial deposit into a bank of $55,000?

Answer 1

55,000÷0.04
=1,375,000

55,000÷0.02
=2,750,000

2,750,000−1,375,000
=1,375,000 increase