Assuming initially that the required reserve ratio = 10%,the currency-deposit ratio = 40%,and the excess reserve ratio = 0,a decrease in the required reserve ratio to 5% causes the M1 money multiplier to ________,everything else held constant.

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The M1 money multiplier formula is 1/required reserve ratio x currency-deposit ratio x excess reserve ratio. Initially, with a required reserve ratio of 10%, the M1 money multiplier is 1/0.1 x 0.4 x 0 = 2.8. When the required reserve ratio decreases to 5%, the M1 money multiplier formula becomes 1/0.05 x 0.4 x 0 = 5.6. This means that the money multiplier has increased from 2.8 to 5.6, which corresponds to an increase in the money supply. However, since the currency-deposit ratio and excess reserve ratio are held constant, the increase in the money supply will be limited to the amount that banks are willing to lend out.

Assuming Initially That the Required Reserve Ratio = 10%,the Currency-Deposit