quick Flashcards
1
Q
reserve ratio
what is the money multiplier
A
reserves / despoits is the reserve ratio
Money multiplier: 1/rr
if the reserve ratio is 10% (or 0.10 as a decimal), the money multiplier would be
1
0.10
=
10
0.10
1
=10. This means that for every dollar held in reserves, the banking system can theoretically create up to 10 dollars in money supply.
2
Q
GDP multiplier
A
government spending * 1/rr
3
Q
Change in money supply
A
chane in money supply = change in reserves *1/rr
4
Q
deposit =
A
excess reserves / reserve ratio
5
Q
A
