In Zealand, banksʹ desired reserve ratio is 20 percent and there is no currency drain. The money multiplier equals _____________ .

Name: In Zealand, banksʹ desired reserve ratio is 20 percent and there is no currency drain. The money multiplier equals _____________ .
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Question

Quizplus · Accepted Answer

The money multiplier equals the inverse of the reserve requirement ratio. So, in this case, the money multiplier is 1/0.2, which equals 5.0. Therefore, the correct answer is D.

In Zealand, Banksʹ Desired Reserve Ratio Is 20 Percent and There