If the Fed buys $300 in securities and the reserve requirement is 5%, according to the simple formula for the money multiplier, the money supply

Question

Quizplus · Accepted Answer

The money multiplier formula is 1/reserve requirement. With a 5% reserve requirement, the multiplier is 1/0.05 = 20. If the Fed buys $300 in securities, this initial injection is multiplied by 20, increasing the money supply by $600 (300 x 20).

If the Fed Buys $300 in Securities and the Reserve