If the currency-depoist ratio equals 0.5 and the reserve-depoist ratio equals 0.1,then the money multiplier equals:

To find the money multiplier, we use the formula:

$MM = \frac{1 + c}{r + c}$

where:

• $MM$ is the money multiplier,
• $c$ is the currency-deposit ratio,
• $r$ is the reserve-deposit ratio.

1. Break Down the Problem

• Identify values: $c = 0.5$ and $r = 0.1$.
• Apply the money multiplier formula.

2. Relevant Concepts

The formula for the money multiplier takes into account both the currency-deposit ratio and the reserve-deposit ratio.

3. Analysis and Detail

Substituting the given values into the formula:

$MM = \frac{1 + 0.5}{0.1 + 0.5}$

4. Verify and Summarize

Calculating the components:

$MM = \frac{1.5}{0.6} = 2.5$

Final Answer

The money multiplier equals $2.5$.