Which will have a larger impact on the money multiplier

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Reference no: EM131095952

Suppose the currency-to-deposit ratio is 0.2, the excess reserve-to-deposit ratio is 0.05, and the required reserve ratio is 0.1. Which will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio or in the excess reserves ratio?

Initially, the money multiplier is m = ________.

If the currency-to-deposit ratio rises to 0.25, the multiplier falls to m = _______.

If, instead, the excess reserve-to-deposit ratio rises, the multiplier will be m = ________.

So, multiplier falls by more with the increase in the excess reserve ration or currency ratio?

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

Reference no: EM131095952

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