Suppose a banking system has a required reserve ratio of 0.15. How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?

Question

Business

Marianna Morton

6 June, 21:42

Suppose a banking system has a required reserve ratio of 0.15. How much can the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system?

+3

Answers (1)

Know the Answer?

Itzel · Answer 1

the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system is $6.67billion.

Explanation:

Increase in money supply = 1/0.15

Increase in money supply = $6.67 billion

Therefore, the money supply increase in response to a $1 billion increase in excess reserves for the whole banking system is $6.67billion.