If the banks in an economy operate with a reserve ratio of 20 percent then the money multiplier is ?
Correct answer: D. 5
- A. 4
- B. 20
- C. 25
- D. 5
Explanation
With a reserve ratio of 20 percent, the simple money multiplier is the reciprocal of the ratio: 1 ÷ 0.20 = 5. The correct option is therefore 5.
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