The simple money multiplier forb the banks is given as 20.
How to solve for the money multiplier
The increase in the supply of money is what is called the money multiplier. This is used to determine the supply of money in an economy because it is known to have an effect on the interest rate of the economy.
The formula for the simple money multiplier is given as;
1/R
Where R is the Required reserve ratio
In the question the given reserved ration is said to be 5%
Hence the calculation would be
1/5%
= 1/0.05
= 20
The simple money multiplier is given as 20
Read more on money multiplier here: https://brainly.com/question/13988758
#SPJ1
