Banks reserve and effects of multiplier on economy

Reference no: EM1314526

1. Why are commercial banks required to have reserves? Explain why reserves are an asset to commercial banks but a liability to the Federal Reserve? What are excess reserves? What is the significance of excess reserves?

2. Explain the creation of money from excess reserves and the multiple deposit expansion in the banking system. How does the multiplier affect the supply of money?

Reference no: EM1314526

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