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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

If reserves increase by $2 million and the required reserve ratio is 8 percent, what is the change in the money supply?

To determine

The change in money supply.

Explanation

It is given that the change in reserves (ΔR) is $ 2 million and the required ratio (r) is 8 percent.

The change in money supply can be calculated by substituting the respective vales in equation (1) as follows:

Change in money supply=1r×(ΔR)

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