Question

If the central bank prints $5000, which is handed to citizens with a currency ratio of 0.2 and a bankers’ reserve ratio of 0.2, what will happen?

What is the final chance to the money supply? What is the money multiplier?

Answer 1

Currency Reserve Ratio Ratio (c) = (R) = 0.2 0.2 & Money Multiplier = C+1 CAR Monetary Base (B) = $ 5000 Money supply (M) = (C+ 1 ) . (B) & CARI Money Multiplier = n = 0.241 0.2+0.2 1.2 Money supply (A) = (c) . (6) M = (3) x(5000) = $ 15,000 when central bank prunts & 5000 aroid there is currency ratio of 0.2 and bankar's reserve ratio of 0.2, money supply will be 3 times of monetary bare i.. & 15,000