Use the information below to answer the following questions.
Fact 24.6.1
The Bank of Speedy Creek has chosen the following initial balance sheet:

-Refer to Fact 24.6.1.Suppose all the banks in the banking system have the same desired reserve ratio as the Bank of Speedy Creek.If the currency drain ratio is 32 percent,what is the size of the money multiplier?

Question

Use the information below to answer the following questions.
Fact 24.6.1
The Bank of Speedy Creek has chosen the following initial balance sheet:
 
-Refer to Fact 24.6.1.Suppose all the banks in the banking system have the same desired reserve ratio as the Bank of Speedy Creek.If the currency drain ratio is 32 percent,what is the size of the money multiplier?

Quizplus · Accepted Answer

The money multiplier is 1/(required reserve ratio + currency drain ratio). In this case, the required reserve ratio is the same as the Bank of Speedy Creek, which is 10%. The currency drain ratio is 32%. So, the money multiplier is 1/(0.10 + 0.32) = 1/0.42 = 2.38.

Use the Information Below to Answer the Following Questions