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Suppose that the public holds 50% of the money supply in currency and the reserve requirement is 20%.Banks hold no excess reserves.A customer deposits $6000 in her chequable deposit.
-(Scenario: Holding Cash) Refer to Scenario: Holding Cash. The money multiplier is:

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The money multiplier is calculated as 1 / (reserve requirement + currency ratio). With a reserve requirement of 20% (0.2) and a currency ratio of 50% (0.5), the money multiplier is 1 / (0.2 + 0.5) = 1 / 0.7, which is less than 5.

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