The currency deposit ratio,c,is 0.10.The reserve requirement,rr,is 0.07.The excess reserve ratio,e,is 0.10.What is the size of the money multiplier?

Question

Quizplus · Accepted Answer

Money multiplier = 1/rr = 1/0.07 = 14.29
Required reserve ratio = rr + e = 0.07 + 0.10 = 0.17
Currency deposit ratio = c = 0.10
Money multiplier including currency deposit ratio = (1 + c)/(rr + e + c) = (1 + 0.10)/(0.17 + 0.10) = 1.10/0.27 = 4.07.

The Currency Deposit Ratio,c,is 0