Ask Question
14 April, 10:48

g If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier Group of answer choices decreases from 20 to 8. decreases from 12.5 to 5. increases from 8 to 20. increases from 5 to 12.5.

+1
Answers (1)
  1. 14 April, 12:00
    0
    The answer is A. decreases from 20 to 8

    Explanation:

    Money multiplier is the amount of money that commercial banks generate with each dollar of their reserves.

    The formula is:

    1/reserve requirement.

    When the reserve requirement was 5 percent, money multiplier will be:

    1/0.05 = 20

    And when the reserve requirement was 12.5 percent, money multiplier will be:

    1/0.125 = 8.

    Therefore, money multiplier decreases from 20 to 8
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “g If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier Group of answer choices decreases from ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers