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Minchanka [31]
3 years ago
10

Suppose that the central bank has increased the money supply such that there is an additional $ 231115 in excess reserves. If th

e reserve ratio is 15 percent, what is the maximum increase in money supply
Business
2 answers:
Alex787 [66]3 years ago
5 0

Answer:

$196448

Explanation:

Since the central bank has increased the money supply by $231115 but the reserve ratio is maintained at 15%, this means that 85% of the money is being injected in the form of money supply.

Hence, the maximum increase in money supply, the 85% of $231115 is: $196448.

Hope this helps.

Thank you and Good luck.

aleksklad [387]3 years ago
4 0

Answer:

$1541537.05

Explanation:

Calculate the money multiplier

   = 1/ reserve ratio

reserve ratio = 15% = 0.15

therefore the money multiplier = 1/0.15 = 6.6666 ≈ 6.67

to calculate the maximum increase in money supply would be

money multiplier * excess reserve added

6.67 * $231115 = $1541537.05

since there is an increase in money supply by the central bank and this resulted in an additional $231115 in excess reserve hence the maximum increase in money supply will be $1541537.05

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