Question

Suppose you deposit ​$1 comma 2001,200 cash into your checking account. By how much will the total money supply increase as a result when the required reserve ratio is 0.22​0? The change in the money supply​ is: ​$nothing ​(enter your result rounded to the nearest dollar​).

Answer 1

Answer:

The change in money supply amounts to $7,084,248

Explanation:

Computing the change in money supply as:

Using the multiplier as:

Multiplier = 1 / Required reserve ratio

where

Required reserve ratio is 0.220

So,

Multiplier = 1 / 0.220

Multiplier = 4.54

So, the new money supply would be:

= Multiplier × Old money supply

where

old money supply is $2,001,200

Multiplier is 4.54

So,

= 4.54 × $2,001,200

= $9,085,448

Therefore, change in money supply is:

Change in money supply = $ 9,085,4448 - $2,001,200

Change in money supply = $7,084,248