Question

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the fed sells $25.5 million worth of bonds to the public, bank reserves

Answer 1

To figure the simple money multiplier, you divide 1 by the required reserve ratio. For example, if the required reserve ratio is 3 percent, divide 1 by 0.03 to find the simplemoney multiplier equals 33.3.