The Central Bank reduced the reserve ratio from 15% to 10%. Calculate the new money multiplier.

Step 1: Identify the new reserve ratio. The Central Bank reduced the reserve ratio to 10%. In decimal form, the reserve ratio is 0.10. Step 2: Apply the money multiplier formula. The money multiplier (M) is calculated as the reciprocal of the reserve ratio (r): M = 1/r Step 3: Substitute the new reserve ratio and calculate the money multiplier. M = 1/0.10; M = 10 The new money multiplier is 10. The new money multiplier is 10.

The Central Bank reduced the reserve ratio from 15% to 10%. Calculate the new money multiplier.

Step 1: Identify the new reserve ratio. The Central Bank reduced the reserve ratio to 10%. In decimal form, the reserve ratio is 0.10. Step 2: Apply the money multiplier formula. The money multiplier (M) is calculated as the reciprocal of the reserve ratio (r): M = 1/r Step 3: Substitute the new reserve ratio and calculate the money multiplier. M = 1/0.10; M = 10 The new money multiplier is 10. The new money multiplier is 10.

Solved: The Central Bank reduced the reserve ratio from 15%…

Identify the new reserve ratio.
The Central Bank reduced the reserve ratio to 10%.
In decimal form, the reserve ratio is 0.10.
Apply the money multiplier formula.
The money multiplier (M) is calculated as the reciprocal of the reserve ratio (r):
$M = \frac{1}{r}$
Substitute the new reserve ratio and calculate the money multiplier.
$M = \frac{1}{0.10}$ $M = 10$
The new money multiplier is 10.

The new money multiplier is 10.

The Central Bank reduced the reserve ratio from 15% to 10%. Calculate the new money multiplier.

Answer

Step-by-step solution

Identify the new reserve ratio.

Apply the money multiplier formula.

Substitute the new reserve ratio and calculate the money multiplier.

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