If the banking system has a required reserve ratio of 20 percent,then the money multiplier is:
A) 0.2.
B) 0.8.
C) 1.25.
D) 5.0

Name: If the banking system has a required reserve ratio of 20 percent,then the money multiplier is: A) 0.2. B) 0.8. C) 1.25. D) 5.0
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Question

Quizplus · Accepted Answer

The money multiplier is calculated as 1 divided by the required reserve ratio. Therefore, with a required reserve ratio of 20 percent (or 0.2), the money multiplier is 1 / 0.2 = 5.0.

If the Banking System Has a Required Reserve Ratio of 20