If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Question

Quizplus · Accepted Answer

The money multiplier is 1 divided by the reserve ratio, which is 1/0.12 = 8.33. The change in checkable deposits is the increase in reserves multiplied by the money multiplier: $7 million * 8.33 = $58.33 million.

If Reserves Increase by $7 Million and the Required Reserve