Please help to understand how to do these equations.
Given original deposits of $1,000 and a reserve requirement of 10%;
a) How much new money could be created?
b) What would be the total reserves required?
c) What is the money supply multiplier?
The maximum value for the money multiplier is equal to the reciprocal of the reserve (requirement) ratio, so that
M = 1 / r
where M ...
Money supply multipliers and reserves are analyzed for an original deposit of $1000 and a reserve requirement of 10%.