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Let [tex]\( r = 0.05 \)[/tex] be the reserve rate. Which of the following is the money multiplier?

A. [tex]\( \frac{1}{0.05^2} \)[/tex]
B. [tex]\( 0.05^2 \)[/tex]
C. [tex]\( 10 \cdot 0.05 \)[/tex]
D. [tex]\( \frac{1}{0.05} \)[/tex]

Sagot :

GinnyAnswer
To determine the money multiplier given a reserve rate [tex]\( r \)[/tex], we use the formula:
[tex]\[ \text{Money Multiplier} = \frac{1}{\text{Reserve Rate}} \][/tex]

Given the reserve rate [tex]\( r = 0.05 \)[/tex], we substitute this value into the formula:
[tex]\[ \text{Money Multiplier} = \frac{1}{0.05} \][/tex]

Now, performing the division:
[tex]\[ \frac{1}{0.05} = 20.0 \][/tex]

Therefore, the correct option that corresponds to the money multiplier is:
[tex]\[ \boxed{D. \frac{1}{0.05}} \][/tex]

Thus, the money multiplier for a reserve rate of [tex]\( 0.05 \)[/tex] is 20.0.
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