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  • Running Head: ECONOMICS QUESTION 1

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    The document calculates the reserve ratio and money multiplier for Delta Bank. The reserve ratio is 9.3% based on deposits of $280 million and reserves of $30 million. The money multiplier is then calculated to be 10.75 based on the reserve ratio. The money multiplier refers to the increase in money supply that results from an increase in bank reserves.

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    The document calculates the reserve ratio and money multiplier for Delta Bank. The reserve ratio is 9.3% based on deposits of $280 million and reserves of $30 million. The money multiplier is then calculated to be 10.75 based on the reserve ratio. The money multiplier refers to the increase in money supply that results from an increase in bank reserves.

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    12 views2 pages

    Running Head: ECONOMICS QUESTION 1

    Uploaded by

    sirjamssy
    The document calculates the reserve ratio and money multiplier for Delta Bank. The reserve ratio is 9.3% based on deposits of $280 million and reserves of $30 million. The money multiplier is then calculated to be 10.75 based on the reserve ratio. The money multiplier refers to the increase in money supply that results from an increase in bank reserves.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Running head: ECONOMICS QUESTION 1

    Economics Question

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    Running head: ECONOMICS QUESTION 2

    Calculate the Reserve Ratio of Delta Bank

    Reserve ratio refers to the percentage of bank deposits that the Central Monetary Authority

    requires banks to hold as a reserve. For Delta Bank, the deposits are 280 million, and the reserves

    are 30 million. Therefore, the reserve ratio is; Reserve ratio (RR) = Deposits/Reserves. RR=

    280,000,000/30,000,000. RR= 9.3%.

    How much will the money multiplier be?

    Money multiplier= 1/RR.

    Money multiplier= 1/0.093

    The money multiplier will be 10.75.

    Define money multiplier

    A money multiplier refers to the incremental figure that boots money supply. It describes the

    percentage by which the money supply will increase as a result of an increase in bank reserves.

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