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Compute the impact on the money multiplier of an increase in the currency-to-deposit ratio from 10 percent to 14 percent when the reserve requirement Is
Compute the impact on the money multiplier of an increase in the currency-to-deposit ratio from 10 percent to 14 percent when the reserve requirement Is 8 percent of deposits, and banks' desired excess reserves are 3 percent of deposits Instructions: Enter your responses rounded to two decimal places. When desired currency holdings 10 % of deposits, m When desired currency holdings 14 % of deposits, m Suppose the currency-to-deposit ratio is 0.2, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is 0.05. 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? Instructions: Enter your response rounded to two decimal places Initially, the money multiplier is m If the currency-to-deposit ratio rises to 0.25, the multiplier will be m| If, instead, the excess reserve-to-deposit ratio rises, the multiplier will be m 10 So, multiplier falls by more with the increase in the currency ratio
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