Question: 8. The BASIC fi nancial system has a required reserves ratio of 15 percent; initial excess reserves are $5 million, cash held by the public

8. The BASIC fi nancial system has a required reserves ratio of 15

percent; initial excess reserves are $5 million, cash held by the public

is $1 million and is expected to stay at that level, and no other leakages

or adjustments are in the system.

a. What would be the money multiplier and the maximum

amount of checkable deposits?

b. What would be the money supply amount in this system after

deposit expansion?

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