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Total deposit creation in the banking system

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Reference no: EM132421736

Are my answers for the following correct?

a. Suppose that the reserve requirement is 7.15%. If 4 firms deposit a total of $1 million into a demand deposit account at the First national Bank, what is the total deposit creation in the banking system using the simple deposit multiplier?

b. Consider the preceding question using the money multiplier. If the currency ratio is 38% and the excess reserve ratio is 2%, what is the change in money supply?  

c. If the reserve requirement were eliminated (and the currency ration is 40% and the excess reserve ratio is 1%), how much would this change size of the money supply?  

Reference no: EM132421736

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