Discuss about money supply suggested by creation multiplier

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Reference no: EM131789067

Question: Assume that the money base is increased by $2 billion dollars, that the currency demand deposit ratio is 5%, that the reserve requirement is 10%, and that the excess reserve demand deposit ratio is 40%.

The simple money creation multiplier suggests that the money supply will

a) increase or

b) decrease by _______ billion dollars.

While the more complete multiplier suggests it will

A) increase or

B) decrease by ______ billion dollars?

Reference no: EM131789067

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