Question

Suppose that the central bank has increased the money supply such that there is an additional $ 689645 in excess reserves. If the reserve ratio is 9.0 percent, what is the maximum increase in money supply? Round your answer to the nearest dollar.

Answer 1

`increase\ in\ money\ supply=(1)/(0.09)* 689645=$7662722.22`

Step-by-step explanation:

We have given required reserve ratio = 9 %

Excess reserve = $ 689645

We have to calculate increase in money supply

Increase in money supply is given by

`increase\ in\ money\ supply=(1)/(required\ reserve\ ratio)* excess\ reserve`

So
`increase\ in\ money\ supply=(1)/(0.09)* 689645=$7662722.22`