Required Reserve Ratio in Cambridge Bank

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• Increase in required ratio

  (not sure) Hi, Here is the answer: Answer: Increase in required ratio represents a contractionary monetary policy by the FED. So if the fed raise the reserve ratio from 10% to 12% this means that the required reserve to the bank increases.

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  Use a simple Balance Sheet for a typical bank, which has $5,000 of deposits, a required reserve ratio of 10 percent, and excess reserves of $0. a. What is the value of money multiplier? b.

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• The money multiplier

  Since the bank is not required to hold this reserve, the bank can lend out an additional $30000. The money multiplier in the absence of currency drain is given by 1/RRR, where RRR is the required reserve ratio.

• The Federal Reserve

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