Question

For this​ question, assume that individuals hold both currency and checkable deposits. The money multiplier is equal​ to:

Answer 1

Money multiplier = 1 / C + θ(1 - c)

Step-by-step explanation:

The money multiplier is the ratio of Deposits to Required reserves ratio. On any increase in deposits in commercial banks, the money multiplier measures the number of times that aggregate money supply increases in the economy as a result of the increase. The money multiplier = 1 / C + θ(1 - c). Where C denote Currency and θ(1 - c) denote Check-able deposit.