In an economy, if the money multiplier equals 5.5, and the current- deposit ratio is 0.1, what is the value of reserve-deposit ratio?A.0.1B.0.04C.0.2D.0.15
Question
In an economy, if the money multiplier equals 5.5, and the current- deposit ratio is 0.1, what is the value of reserve-deposit ratio?A.0.1B.0.04C.0.2D.0.15
Solution
The money multiplier is calculated by the formula 1 / (Reserve-Deposit Ratio + Current-Deposit Ratio).
Given that the money multiplier is 5.5 and the current-deposit ratio is 0.1, we can substitute these values into the formula and solve for the reserve-deposit ratio.
5.5 = 1 / (Reserve-Deposit Ratio + 0.1)
To isolate the reserve-deposit ratio, we first take the reciprocal of both sides:
1 / 5.5 = Reserve-Deposit Ratio + 0.1
This simplifies to:
0.1818 = Reserve-Deposit Ratio + 0.1
Subtract 0.1 from both sides to solve for the reserve-deposit ratio:
0.1818 - 0.1 = Reserve-Deposit Ratio
0.0818 = Reserve-Deposit Ratio
So, the reserve-deposit ratio is approximately 0.08. However, this is not one of the options given. It seems there may be a mistake in the question or the provided options.
Similar Questions
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
The reserve-deposit ratio change from 0.5 to 0.2. What is the change of the currency-deposit ratio?A.1B.1/4C.3/4D.0.8
If there is an economy’s monetary base is $1000 m, and the reserve-deposit ratio (rr) is 0.35. suppose people hod 1/5 of their money as currency and deposit 4/5 at banks. Then what are the currency -deposit ratio and money supply?A.0.2 2180B.0.25 2270C. 0.8 1570D.0.25 454
In country A, the currency-deposit ratio is 0.6 and the reserve-deposit ratio is 0.2,What is the money multiplier? If the monetary base is ＄1000, What is the money supply?A.m=2; M=＄2000B.m=0.8; M=＄800C.m=1.6; M=1600D.m=2; M=＄1800
If the currency-depoist ratio equals 0.5 and the reserve-depoist ratio equals 0.1,then the money multiplier equals:
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.