INeedHelp27
  • INeedHelp27
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?
Mathematics
schrodinger
  • schrodinger
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anonymous
  • anonymous
What do you think it is?
INeedHelp27
  • INeedHelp27
Bruh i need the Answer.
jim_thompson5910
  • jim_thompson5910
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

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INeedHelp27
  • INeedHelp27
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
  • jim_thompson5910
it sounds like dumbcow found the answer on this page http://openstudy.com/study#/updates/51474bebe4b04cdfc58302b7 well not the answer to your specific problem, but it's a similar one

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