If currency outstanding equals $200 million, checkable deposits equal $1 billion, reserves equal $150 million, and the required reserve ratio is 0.10, the money multiplier equals

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The money multiplier is equal to 1/required reserve ratio. Therefore, the money multiplier in this case is 1/0.10 = 10. The maximum amount of checkable deposits that can be supported by the given reserves is equal to the currency plus reserves, or $200 million + $150 million = $350 million. Multiplying this by the money multiplier of 10 gives the total amount of checkable deposits that can be supported by the initial reserves, which is $3.5 billion. Therefore, the money multiplier is 3.43 ($1 billion/checkable deposits = 1/0.29).

If Currency Outstanding Equals $200 Million, Checkable Deposits Equal $1