Answer:
$3,170.73 billion
Explanation:
Data provided in the question:
Required reserve ratio, r = 0.10
currency ratio, c = 0.30
excess reserve ratio, e = 0.01
The monetary base, MB = $1,000 billion
Formula for money multiplier, m = [tex]\frac{1+c}{r+e+c}[/tex]
on substituting the respective values, we get
m = [tex]\frac{1+0.30}{0.10+0.01+0.30}[/tex]
or
m = [tex]\frac{1.30}{0.41}[/tex]
or
m = 3.17073
Now,
Money supply, M = m × MB
or
M = 3.17073 × $1,000 billion
or
M = $3,170.73 billion
