If the required reserve ratio is 0.20, what is the maximum amount of money that can be created from a $5 million deposit in the banking system?

Name: If the required reserve ratio is 0.20, what is the maximum amount of money that can be created from a $5 million deposit in the banking system?
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Quizplus · Accepted Answer

The money multiplier is 1/required reserve ratio, which is 1/0.20 = 5. The maximum money created is the initial deposit multiplied by the money multiplier: $5 million * 5 = $25 million.

If the Required Reserve Ratio Is 0