Answer:
The resulting money multiplier is 20.
Step-by-step explanation:
Consider the provided information.
The federal reserve sets the reserve rate to 5%, and we need to find the resulting money multiplier.
Formula for money multiplier is:
[tex]\text{Money Multiplier}=\frac{1}{\text{Reserve rate}}[/tex]
Now substitute the value of Reserve rate = 5% or 0.05 in the above formula.
[tex]\text{Money Multiplier}=\frac{1}{0.05}[/tex]
[tex]\text{Money Multiplier}=\frac{100}{5}[/tex]
[tex]\text{Money Multiplier}=20[/tex]
Hence, the resulting money multiplier is 20.
