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Assuming the currency ratio is 0.2, and the reserve ratio is 0.9. What is the value of money multiplier? Provide your answer up to two decimal places

Question

Assuming the currency ratio is 0.2, and the reserve ratio is 0.9. What is the value of money multiplier?

Provide your answer up to two decimal places

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Solution

The money multiplier is calculated using the formula 1 / Reserve Ratio.

Given that the reserve ratio is 0.9, the money multiplier would be calculated as follows:

Money Multiplier = 1 / 0.9 = 1.11 (rounded to two decimal places)

So, the value of the money multiplier is 1.11.

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The simple money multiplier isGroup of answer choicesthe reciprocal of the required reserve ratio.always 1.the same as the required reserve ratio.different from bank to bank even if the required reserve ratio is the same for all banks.

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