Suppose you deposit $1 comma 000 cash into your checking account. by how much will checking deposits in the banking system increase as a result when the required reserve ratio is 0.50?

change in the Money supply = $2000

Explanation:

given data

deposit = $1,000

reserve ratio = 0.50

to find out

how much will checking deposits in the banking system increase as a result

solution

we get here change in the Money supply that is express as

change in the Money supply = Change in the Monetary base × Money multiplier     ............................1

here

Money multiplier =       ..................2

Money multiplier =      

Money multiplier = 2

put value in equation 1

change in the Money supply = 1000 × 2

change in the Money supply = $2000

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