Suppose the desired reserve ratio is 10 percent, and the Bank of Canada buys a $5,000 security from a depository institution.How is the money supply affected, using the simple multiplier?

Question

Quizplus · Accepted Answer

Using the simple multiplier formula, we can determine the change in the money supply:
Change in money supply = (1/reserve ratio) x change in reserves
= (1/0.1) x $5,000
= $50,000
Therefore, the money supply increases by $50,000.

Suppose the Desired Reserve Ratio Is 10 Percent, and the Bank