. Suppose that the required reserve ratio is 9%, currency in circulation is $620 billion, the amount of checkable deposits is $950 billion, and excess reserves are $15 billion

Suppose that the required reserve ratio is 9% and the currency in circulation is $620 billion.

a. The money supply is $1570 Billion.

b. The currency deposit ratio is 65.26%.

c. The excess reserves ratio is 1.58%.

d. The money multiplier is 2.18.

a. Money supply

Money supply= Currency in circulation + Checkable deposits.

Money supply= 620 Billion + 950 Billion

Money supply= $1570 Billion

b. Currency deposit ratio

Currency deposit ratio= Currency in circulation / Checkable deposits

Currency deposit ratio= 620 Billion / 950 Billion×100

Currency deposit ratio= 65.26%

c. Excess reserve ratio

Excess reserve ratio = Excess reserves / Checkable deposits

 Excess reserve ratio = 15 Billion / 950 Billion×100

Excess reserve ratio =1.58%

d. Money Multipliers

  Money Multipliers = (1+0.6526) / (0.09+0.0158+0.6526)

 Money Multipliers=1.6526/0.7584

 Money Multipliers=2.179

 Money Multipliers=2.18 (Approximately)

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Money supply (M) = $1,570 Billion

Money multiplier (m) = 2.18

Excess reserve ratio (e) = 0.016

Explanation:

Suppose that the required reserve ratio is 9%, currency in circulation is $620 billion, the

amount of checkable deposits is $950 billion, and excess reserves are $15 billion.

(a)Calculate the money supply, the currency deposit ratio, the excess reserve ratio,

and the money multiplier.

Given:

r = required reserve ratio = 0.9

C = currency in circulation = $ 620 B

D = checkable deposits = $ 950 B

ER = excess reserves = $ 15 B

Money supply (M) = currency in circulation  + checkable deposits = $620 B + $950 B = $1,570 Billion

Money multiplier (m) =

c = C/D = ($620 B)/($950 B) = 0.653

e = ER/D = ($15 B)/($950 B) = 0.016

Therefore Money multiplier (m) =

Excess reserve ratio (e) = ER/D = ($15 B)/($950 B) = 0.016

answer(b) gdp is not affected by

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