Question

If the federal reserve sets the reserve rate to 5%, what
is the resulting money multiplier

Answer 1

To get this answer you’d just divide 5% by 100, and you’d get 0.05. I hope this helps!

Answer 2

The resulting money multiplier is 20.

Explanation:

Consider the provided information.

The federal reserve sets the reserve rate to 5%, and we need to find the resulting money multiplier.

Formula for money multiplier is:

`\text{Money Multiplier}=\frac{1}{\text{Reserve rate}}`

Now substitute the value of Reserve rate = 5% or 0.05 in the above formula.

`\text{Money Multiplier}=(1)/(0.05)`

`\text{Money Multiplier}=(100)/(5)`

`\text{Money Multiplier}=20`

Hence, the resulting money multiplier is 20.