If reserves increase by $29 million and the required reserve ratio is 11%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?
A) $319 million
B) $26.3 million
C) $40 million
D) $263.6 million

Question

Quizplus · Accepted Answer

The money multiplier is 1/0.11 = 9.09. The change in checkable deposits is $29 million * 9.09 = $263.6 million.

If Reserves Increase by $29 Million and the Required Reserve