In the simple model of multiple deposit creation in which banks do not hold excess reserves,the increase in checkable deposits equals the product of the change in reserves and the

Question

Quizplus · Accepted Answer

The simple deposit expansion multiplier is a formula that shows the maximum amount by which the money supply can increase for a given increase in reserves. It is equal to 1/RR, where RR is the reserve requirement ratio. Since the question assumes no excess reserves, RR can be taken as the required reserve ratio. Therefore, the increase in checkable deposits equals the change in reserves multiplied by the simple deposit expansion multiplier.

In the Simple Model of Multiple Deposit Creation in Which