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Suppose banks increase excess reserves by $ 471845 . If the reserve ratio is 12 percent, what is the maximum increase in the money supply

Respuesta :

Tundexi

Answer:

$3,932,025.94

Explanation:

Multiplier = 1 / rr

Multiplier = 1 / Reserve ratio

Multiplier = 1 / 0.12

Multiplier = 8.3333

Increase in money supply = Multiplier * Increase in excess reserves

Increase in money supply = 8.3333 * $471,845

Increase in money supply = $3,932,025.94

So, the maximum increase in the money supply is $3,932,025.94.