What is the money multiplier

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Assume that the banking system has total reserves of $100 billion. Assume also that required reserves are 10 percent of checking deposits, and that banks hold no excess reserves and households hold no currency.

a. What is the money multiplier? What is the money supply?

b. If the Fed now raises required reserves to 20 percent of deposits, what is the change in reserves and the change in the money supply?

Reference no: EM131112826

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