The simple money multiplier if the banks in Ruritania have a required reserve ratio of eight percent will be 12.5.
What is the significance of money multiplier?
Money multiplier can be referred to or considered as the total derived after division, finding the reciprocal of the required reserve ratio of an any commercial bank or any financial institution as such. In the above case, the money multiplier will be computed as 1 / 8 × 100 = 12.5.
Therefore, the significance regarding the simple money multiplier has been aforementioned.
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