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Suppose that the required reserve ratio is 7.00%. What is the simple money (deposit) multiplier? Round to two decimal places.
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Suppose that the required reserve ratio is 7.00%. What is the simple money (deposit) multiplier? Round to two

decimal places.

User Manuel Beaudru
by
4.5k points

1 Answer

5 votes

Answer:

14.29

Step-by-step explanation:

Given

Reserve Ratio (R) = 7.00%

Required

Calculate the deposit multiplier (M)

To calculate simple money multiplier (M), we make use of the following formula.

M = 1/R

Where

R represent the reserve ratio

Substitute 7.00% for R

M = 1/7.00%

Convert % to decimals

M = 1/0.07

M = 14.29 ---- Approximated

Hence, the simple money multiplier is 14.29

User Malek Hijazi
by
4.6k points
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