Question

If legal reserve ratio is 20%the value of money multiplier would be

Answer 1

Answer:-

Money multiplier is the maximum amount the money supplied can be increased based on the increase in the reserves within the banking.

The total deposits the bank hold and is not allowed to lend are called reserves.

Money multiplier = 1/r , where r = reserve ratio

Money multiplier = 1/r , where r = reserve ratioMoney multiplier = 1/20 = 0.05

hope it helps..