If the Federal Reserve decreases the reserve rate from 4% to 2%, how does this affect the amount of money that would result because of fractional-reserve banking from an initial deposit into a bank of $55,000?

Question

anonymous · Answer

What do you think it is?

ineedhelp27 · Answer

Bruh i need the Answer.

jim_thompson5910 · Answer

The reserve rate or reserve ratio of 4% means that the bank must keep 4% of the cash that was deposited. They must keep it in their vault. The rest (96%) can be loaned out to others to generate more money. Hopefully based on this you can see how lowering the reserve ratio would affect how the bank makes money. http://www.investopedia.com/terms/r/reserveratio.asp

ineedhelp27 · Answer

A.	It increases the amount by $2,750,000.
 		B.	It decreases the amount by $2,750,000.
 		C.	It decreases the amount by $1,375,000.
 		D.	It increases the amount by $1,375,000.

jim_thompson5910 · Answer

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