reserve ratio= desired reserves/ depositsmoney multiplier= change in excess x money multiplier excess resrves: cash resseves- desired reserves so money multiplier = 1/10%= 10 wouldn't the answer be 10x 10 million?. I'm so confused on where the 9 million came from. I think it's 10 million - 10%. Please help me explain this question. If the Bank of Canada buys a $10 million government bond from a member of the public and the reserve ratio is 10%, the maximum possible change inthe money supply is:O an increase of $90 million.Reason: This answer is found by multiplying excess reserves ($9 million) by the money multiplier of 10 (=1/0.10).O an increase of $100 million.Reason: The answer of $90 million is found by multiplying excess reserves ($9 million) by the money multiplier of 10 (=1/0.10).a decrease of $90 million.Reason: In this case, the money supply increases, not decreases. The answer of $90 million is found by multiplying excess reserves ($9million) by the money multiplier of 10 (=1/0.10).a decrease of $200 million.Reason: In this case, the money supply increases, not decreases. The answer of $90 million is found by multiplying excess reserves ($9million) by the money multiplier of 10 (=1/0.10).

Given that the Bank of Canada bought a $10 million government bond from a member of the public. rr…

Answered: If the Bank of Canada buys a $10…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: The Monetary System

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reserve ratio= desired reserves/ deposits

money multiplier= change in excess x money multiplier

excess resrves: cash resseves- desired reserves

so money multiplier = 1/10%= 10

wouldn't the answer be 10x 10 million?. I'm so confused on where the 9 million came from. I think it's 10 million - 10%. Please help me explain this question.

If the Bank of Canada buys a $10 million government bond from a member of the public and the reserve ratio is 10%, the maximum possible change in
the money supply is:
O an increase of $90 million.
Reason: This answer is found by multiplying excess reserves ($9 million) by the money multiplier of 10 (=1/0.10).
O an increase of $100 million.
Reason: The answer of $90 million is found by multiplying excess reserves ($9 million) by the money multiplier of 10 (=1/0.10).
a decrease of $90 million.
Reason: In this case, the money supply increases, not decreases. The answer of $90 million is found by multiplying excess reserves ($9
million) by the money multiplier of 10 (=1/0.10).
a decrease of $200 million.
Reason: In this case, the money supply increases, not decreases. The answer of $90 million is found by multiplying excess reserves ($9
million) by the money multiplier of 10 (=1/0.10).

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