Money multiplier of increase in currency-to-deposit ratio

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Reference no: EM131095949

Compute the impact on the money multiplier of an increase in the currency-to-deposit ratio from 10 percent to 12 percent when the reserve requirement is 8 percent of deposits, and banks’ desired excess reserves are 3 percent of deposits.

When desired currency holdings = 10% of deposits, m = __________

When desired currency holdings = 12% of deposits, m = __________

Please round answers to the nearest hundredth (2 decimal places). If possible, please explain the calculation.

Reference no: EM131095949

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