Explore BrainMass

# Required Reserve Ratio

Not what you're looking for? Search our solutions OR ask your own Custom question.

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Explain using Year 1 Macro-Canadian Perspective

Some people have suggested raising the required reserve ratio for banks to 100%.

(a) What would the money multiplier be if this change were made?

(b) What effect would such a change have on the money supply?

(c) How could this effect on the money supply in (b) be offset?

(d) Would banks likely favour or oppose this proposal? Why?

https://brainmass.com/economics/demand-supply/required-reserve-ratio-example-problem-26424

#### Solution Preview

Some people have suggested raising the required reserve ratio for banks to 100%.

(a) What would the money multiplier be if this change were made?
The money multiplier is simply the inverse of the reserve ratio. If the reserve ratio is 100%, then the deposit multiplier is 1.

(b) What ...

#### Solution Summary

The required reserve ratio is assessed in this solution.

\$2.49