Question: 1. While cleaning your apartment, you look under the sofa cushion and find a $50 bill (and a half-eaten taco). You deposit the bill in
1. While cleaning your apartment, you look under the sofa cushion and find a $50 bill (and a half-eaten taco). You deposit the bill in your checking account. The Fed's reserve requirement is 20% of deposits. A. Assuming the banks hold zero excess reserves, calculate the money multiplier B. What is the maximum amount that the money supply could increase? C. What is the minimum amount that the money supply could increase (here, you have to release the zero excess reserves assumption you had to make in B)
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