Question

If the Federal Reserve decreases the reserve rate from 4% to 2%, how does this affect the amount of money that would result because of fractional-reserve banking from an initial deposit into a bank of $55,000?

Answer 1

1/0.04=25
1/0.02=50
50x-25x=25x
X=55000
25*55000=1,375,000

So lowering the reserve ratio would increase the amount of money made.