Chapter 13, Problem 4WNG

### Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

Chapter
Section

### Economics (MindTap Course List)

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

# Reserves change by $10 million and the money supply changes by$50 million. What does the simple deposit multiplier equal? What does the required reserve ratio equal?

To determine

The change in money supply.

Explanation

It is given that the change in reserves (ΔR) is $10 million, and the changes in money supply is$50 million.

It is known that the change in money supply can be calculated using Equation (1) as follows:

Change in money supply=1r×(ΔR)        (1)

The simple deposit multiplier (1r) can be calculated by rearranging Equation (1) as follows:

1r=Change in money supplyΔR

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