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Suppose That Your Bank's Reserve Ratio Is 0

Question 98

Essay
Suppose that your bank's reserve ratio is 0.1 and you withdraw $25 000 from the bank. What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?
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Suppose that your bank's reserve ratio is 0.1 and you withdraw $25 000 from the bank. What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Correct Answer:

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The simple deposit multiplier is equal t...

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