Question #278321

Imagine that the banking system received additional deposits of $100 million and that all the individual banks wish to retain their current liquidity ratio of 20%.What is the size of the bank multiplier?


Expert's answer

Solution:

Bank multiplier = 1 ÷\div Reserve ratio = 1 ÷\div 20% = 5

 

The size of the bank multiplier = 5 times


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