Given the reserve ratios and level of deposits, find out the money multiplier and money supply.
Assuming individuals hold nom cash (all cash is in bank vaults as reserves), find out the simple money supply from the following reserves requirements and deposits in the systems. 5 Points each, 30 points sub total
1.reserve ratio = 5% deposits = $10,000
2.reserve ratio = 10% deposits = $10,000
3.reserve ratio = 5% deposits = $20,000
Now assume individuals hold 25% of their money in the form of ratio.
Compute the approximate real-world money multiplier and the money supply for situations a-c above.