Question

suppose that the monetary base is 500 billion the reserve deposit ratio is 0.1 and the currency deposit ratio is 0.6 . find the money multiplier and money supply

Answer 1

Money Multiplier $=$ $\frac {CDR+1}{RDR+CDR}$ $=$ $\frac {0.6+1}{0.1+0.6}$ $=$ 2.28571

Money supply$=$ money multiplier$×$ monetary base

2.28571$×$ 500$=$ 1142.8571

Answer$=$ 1143