Given the following ratios, explain;

1.How money multiplies and

2.The total increase in money supply if the monetary base (H) increases by $650.

Your answer should include the change in currency in circulation (Cu), deposits (D), required reserves and loans distributed by commercial banks (L).

B= C/D =0.25

X=R/D=0.15

3.Using the multiplier show what happens to money supply if x ratio decrease by 5%.