If total reserves for a bank are $12,000,excess reserves are $2,000,and demand deposits are $100,000,the money multiplier must be

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The money multiplier is calculated as 1/required reserve ratio. The required reserve ratio is the amount of reserves that banks must hold relative to their deposits. Excess reserves are the amount of reserves that banks hold in addition to the required amount. In this case, the required reserves are calculated as 0.10 (or 10% of demand deposits), which equals $10,000. Since the bank has $12,000 in total reserves (which includes $2,000 in excess reserves), the bank's actual reserve ratio is 12% ([$12,000/$100,000] x 100). Therefore, the money multiplier is 1/0.10, which equals 10.

If Total Reserves for a Bank Are $12,000,excess Reserves Are