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    Reserve Ratio and Money Supply

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    Assuming a 15% reserve ratio, an increase in deposits of $300,000 could eventually result in:

    A) a $2 million increase in the money supply.
    B) a $345,000 increase in the money supply.
    C) a $45,000 increase in the money supply.
    D) a $1.5 million increase in the money supply.
    E) there would be no change in the money supply.

    © BrainMass Inc. brainmass.com December 24, 2021, 4:56 pm ad1c9bdddf
    https://brainmass.com/economics/demand-supply/reserve-ratio-money-supply-16625

    SOLUTION This solution is FREE courtesy of BrainMass!

    Reserve ratio=r= 15%
    Increase in deposits=D= $300,000

    Increase in money supply= D/r= $2,000,000 =300000/15%

    Answer: A) a $2 million increase in the money supply.

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

    © BrainMass Inc. brainmass.com December 24, 2021, 4:56 pm ad1c9bdddf>
    https://brainmass.com/economics/demand-supply/reserve-ratio-money-supply-16625

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