A bank receives a deposit of $15,000 and has a required reserve rate of 20%.What is the potential amount of new money that can be created?

Question

Quizplus · Accepted Answer

The potential amount of new money that can be created is determined by the money multiplier formula, which is 1/reserve ratio. In this case, the reserve ratio is 20% or 0.2, so the money multiplier is 1/0.2 = 5. Therefore, the potential amount of new money that can be created from the initial deposit of $15,000 is $15,000 * 5 = $75,000.

A Bank Receives a Deposit of $15,000 and Has a Required