What are the reserve multiplier and the money multiplier

Reference no: EM13323076

Suppose that households wished to maintain $1.00 in pocket money (currency and coin) and $10.00 in liquid savings assets (small CDs, money funds, and savings accounts) for every $1.00 in their checking accounts (transaction deposits). If banks choose their desired reserves to be ten cents for every dollar of transaction deposits, what are the reserve multiplier and the money (M2) multiplier if the Federal Reserve’s reserve requirement ratio is:

(a) 8 percent;

(b) 10 percent; and

Reference no: EM13323076

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