If the federal reserve decreases the reserve rate from 5% 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 $25,000?
a. it increases the amount by $500,000.
b. it decreases the amount by $750,000.
c. it increases the amount by $750,000.
d. it decreases the amount by $500,000.

Step-by-step explanation:

wrong it was the increase by 750,000

the answer is:

the correct option:

b.

to solve the problem, we need to remember how to operate to simplify exponential expressions using the logarithms.

we are given the equation:

then, using placing logarith with base 7 on both sides of the equation, we have:

so, rounding the obtained result to two decimal places (nearest hundreth), we have:

hence, we have that the correct option:

b.

have a nice day!