The Deposit multiplier of Silver National bank is 4.
What is Deposit Multiplier?
- The deposit multiplier is the most money that a bank may make for each unit of cash that it holds in reserves. The deposit multiplier is the proportion of funds held in a bank account that can be lent. Usually, the percentage is set by the Federal Reserve's reserve requirement.
- The deposit multiplier is necessary to keep an economy's essential money supply intact. It belongs to the fractional reserve banking system, which is now used by banks in the vast majority of the world's nations.
As we know that
Deposit Multiplier = 1 /reserve ratio
Deposit Multiplier = 1 /0.25
Deposit Multiplier = 4
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