Question
1. Assume $1000 is deposited into a bank and the required reserve ratio is 10 percent and banks do not hold any excess reserves. How
1. Assume $1000 is deposited into a bank and the required reserve ratio is 10 percent and banks do not hold any excess reserves. How much does the total money supply increase by? 2. Assume $1000 is deposited into a bank and the required reserve ratio is 5 percent and banks do not hold any excess reserves. How much does the total money supply increase by? 3. Assume $1000 is deposited into a bank and the required reserve ratio is 20 percent and banks do not hold any excess reserves. How much does the total money supply increase by? 4. Look back at your answers to 1-3. What is the relationship between the reserve ratio and the deposit expansion multiplier? (In each case, what happened to the multiplier when the reserve ratio changed?)
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