Question

59. At a given point in time, money multiplier is equal to 10. What will be the value of legal reserve ratio? (a) 10% (b) 15% (c) 20% (d) 25%​

Answer 1

Answer:

10%

please mark that this

Answer 2

Money multiplier or even known as the money supply multiplier usually seeks at the multiplier effect that happens due to banks or money supply

• we are given the money multiplier which is equal to 10
• as per the formula :
• The money multiplier = 1/LRR
• Here LRR is the legal reserve ratio
• LRR is the legal minimum fraction that a bank requires to keep with themselves as cash

So,

10 = 1/LRR × 100

RR × 100 LRR = 1/10 × 100

RR = 1/10 × 100 LRR = 10%

• This is also known as the credit multiplier formula

Thus, the correct Option is A