Answer to Question #119596 in Microeconomics for Amal Jamal

Question

2. If the required reserve ratio is 10%, currency in circulation is $400 billion, checkable deposits are $800 billion, and excess reserves total $0.8 billion, calculate the money multiplier?

Answer 1

$Multiplier =$

$${C\over D} +1 \over{C\over D} +rr+{ER\over D}$$

$${400\over 800}+1\over{400\over800}+{10\over100}+{0.8\over 800}$$

$$=2.49584$$