Question

Assume that $1 million is deposited into a bank with a reserve requirement of 15 percent. The value of the money multiplier is 6.67.

What is the maximum change in money supply as a result of this deposit? (Round your answer to two decimal places.)

Answer 1

maximum change in money supply is $6.67 million

Step-by-step explanation:

given data

deposit = $1 million

reserve requirement = 15%

money multiplier = 6.67

to find out

maximum change in money supply

solution

we know here money multiplier is given = 6.67

so maximum change in money will be

maximum change = deposit × money multiplier

put here value

maximum change = $1 million × 6.67

maximum change = $6.67 million

so maximum change in money supply is $6.67 million