If the currency drain is 0.2 and the required reserve ratio is 0.03, the money multiplier is?
A) 0.76.
B) 6.67.
C) 3.23.
D) 4.46.
E) 5.22.
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May 12th, 2010 at 7:01 am
E) 5.22.
Assuming no excess reserves er=0
MM = (1+cr)/(rr+ex+cr) = (1+0.2)/(0.03+0+0.2) = 1.2/0.23 ≈ 5.21739 ≈ 5.22