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2. You are given the following information: Reserves in the banking system amount to $48 billion, of which $45.8 billion are required. Currency in the hands of the public amounts to $692.5 billion while checkable deposits amount to $650 billion. Calculate the money multiplier. (5 Points)

Respuesta :

Answer:

1.814

Explanation:

We can answer this by applying the following formula:

We need to determine C/D, by this we can obtain the valid information required:

C = USD 692.5

D =  USD 650

so, by diving we get; C/D = USD 692.5/USD 650 = 1.065.

Next we calculate rD which can be determine by rD:

= RR/D where RR represents the needed reserves.

rD = USD 45.8/USD 650 or 0.07; Next we can look rE by first reasoning the amount in excess reserves,

ER. ER = R - RR or ER = USD 48- USD 45.8 = $2.2.

rE = ER/D = USD 2.2/USD 650 = 0.0033.

We have the required values  needed to solve for m. Now, Substituting the values we get into the equation mentioned above,

m = 2.065/1.138 or m = 1.814

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