If the reserve ratio is 20 percent,how much new money can $1000 of excess reserves create?
A) $500
B) $5000
C) $50,000
D) $500,000

Name: If the reserve ratio is 20 percent,how much new money can $1000 of excess reserves create? A) $500 B) $5000 C) $50,000 D) $500,000
Brand: Quizplus
Rating: 4.9 (34 reviews)

Question

Quizplus · Accepted Answer

The money multiplier is 1 divided by the reserve ratio, so 1/0.20 = 5. Therefore, $1000 of excess reserves can create $1000 * 5 = $5000 of new money.

If the Reserve Ratio Is 20 Percent,how Much New Money