Determining the money multiplier

Reference no: EM1328536

Suppose the financial institutions are required to keep 11% in reserve and the ratio of individuals' currency holdings to their deposits is 21%. What is the money multiplier? If the financial institutions suddenly became concerned about the safety of their loans, and they decide to keep 2% excess reserves (reserves held by banks in excess of what banks are required to hold). What will be the money multiplier in this case?

Reference no: EM1328536

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