Option 1: 5 -> The money multiplier is calculated using the formula: Money Multiplier = 1 ÷ Reserve Ratio. With a reserve ratio of 20% (or 0.20), the calculation is 1 ÷ 0.20 = 5. This means that for every dollar deposited in the banking system, up to $5 of money supply can be created through the lending process. The money multiplier shows the maximum potential expansion of the money supply based on the fractional reserve banking system. -> correct