Given the following information, find the (i) money supply and the (ii) money mu

Question

Given the following information, find the (i) money supply and the (ii) money multiplier. rr: required reserve ratio = 15% C: currency in circulation = $ 300 B D: checkable deposits = $ 700 B ER: Excess Reserves = $ 0.7 B Given the following information, find the (i) money supply and the (ii) money multiplier. rr: required reserve ratio = 15% C: currency in circulation = $ 300 B D: checkable deposits = $ 700 B ER: Excess Reserves = $ 0.7 B Given the following information, find the (i) money supply and the (ii) money multiplier. rr: required reserve ratio = 15% C: currency in circulation = $ 300 B D: checkable deposits = $ 700 B ER: Excess Reserves = $ 0.7 B

Explanation / Answer

(ii) Formula to calculate money multiplier :

m1=1+(C/D)/[rr+(ER/D)+(C/D)]

Now putting the values we have,

m1 = 1+(300/700)/[0.15+(0.70/700)+(300/700)]

=>m1= 2.46

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