Question

) suppose that currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, and excess reserves are $15 billion. assume that the required reserve ratio is 10%.

a. calculate the money supply, the currency deposit ratio, the excess reserve ratio, and the money multiplier.

Answer 1

Money supply = Currency in circulation + Checkable deposits.=600 + 900 = 1500 Billion

Current deposit ratio = Currency in Circulation/ Checkable deposits. = 600/900 = .667

Excessive reserve ratio = Excess Reserves/Checkable deposits.= 15/900 = .0167

Money multiplier = (1 + C)/(rr + ER + C)= (1 + .667)/ (.0278 + .0167 + .667) = 2.343

Answer 2

Money supply = Currency in circulation + Checkable deposits.=600 + 900 = 1500 Billion

Current deposit ratio = Currency in Circulation/ Checkable deposits. = 600/900 = .667

Excessive reserve ratio = Excess Reserves/Checkable deposits.= 15/900 = .0167

Money multiplier = (1 + C)/(rr + ER + C)= (1 + .667)/ (.0278 + .0167 + .667) = 2.343