Question

Suppose you deposit ​$1 comma 700 cash into your checking account. By how much will the total money supply increase as a result when the required reserve ratio is 0.1​0? The change in the money supply​ is: ​$ nothing ​(enter your result rounded to the nearest dollar​).

Answer 1

Answer:

$17,000

Explanation:

Amount Deposited into checking account = $1,700 cash

Required reserve ratio = 0.10

Money multiplier = 1 ÷ Required reserve ratio

                            = 1 ÷ 0.10

                            = 10

Change in money supply = Amount deposited × Money multiplier

                                          = $1,700 × 10

                                          = $17,000

Therefore, the increase in total money supply would be $17,000.