Question

Suppose you deposit ​$2,200 cash into your checking account. By how much will the total money supply increase as a result when the required reserve ratio is 0.4​0? The change in the money supply​ is: ​$ nothing ​(enter your result rounded to the nearest dollar​).

Answer 1

Answer:

The money supply increases by $3300.

Explanation:

Money multiplier = 1/reserve ratio

= 1/0.4

= 2.5

the change in the money supply = deposit *multiplier -deposit

= $2,200*2.5 - $2,200  

= $3300

Therefore, The money supply increases by $3300.