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Calculate the money multiplier, given the following: suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is
Calculate the money multiplier, given the following: suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is 0.10. Finally, which will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio or in the excess reserve ratio?
- Initially, the money multiplier is m =
- If the currency-to-deposit ratio rises to 0.30, the money multiplier will be m =
- If, instead, the excess reserve-to-deposit ratio rises to 0.10, the money multiplier will be m =
- So, multiplier falls by more with the increase in the:
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