(solve in excel)

Given the following, calculate the M1 money multiplier using the formula m₁ = 1 + (C/D)/[rr + (ER/D) + (C/D)].

Currency	Deposits	Excess Reserves	Required Reserve Ratio	Answer: m1
100	100	10	.1	1.67
100	100	10	.2	1.54
100	1,000	10	.2	3.55
1,000	100	10	.2	1.07
1,000	100	50	.2	1.02
100	1,000	50	.2	3.14
100	1,000	0	1	1

Once you have m, plug it into the formula MS = m MB. So if m₁ = 2.6316 and the monetary base increases by $100,000, the money supply will increase by $263,160. If m₁ = 4.5 and MB decreases by $1 million, the money supply will decrease by $4.5 million, and so forth. Practice this in Exercise 2.

Calculate the change in the money supply given the following:

Change in MB	m1	Answer: Change in MS
100	2	200
100	4	400
100	2	200
100	4	400
1,000	2	2,000
1,000	2	2,000
10,000	1	10,000
10,000	1	10,000