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Suppose you deposit ​$1 comma 000 cash into your checking account. By how much will checking deposits in the banking system increase as a result when the required reserve ratio is 0.5​0?

User Viralk
by
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1 Answer

2 votes

Answer:

change in the Money supply = $2000

Step-by-step explanation:

given data

deposit = ​$1,000

reserve ratio = 0.5​0

to find out

how much will checking deposits in the banking system increase as a result

solution

we get here change in the Money supply that is express as

change in the Money supply = Change in the Monetary base × Money multiplier ............................1

here

Money multiplier =
(1)/(reserve\ ratio) ..................2

Money multiplier =
(1)/(0.5)

Money multiplier = 2

put value in equation 1

change in the Money supply = 1000 × 2

change in the Money supply = $2000

User MyTD
by
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