Question: Given: D ( Total checkable deposits ) = $ 900 billion C (Currency in circulation) = $360 billion Reserve Requirement =7 percent Actual reserves (R)

Given:

D ( Total checkable deposits ) = $ 900 billion

C (Currency in circulation) = $360 billion

Reserve Requirement =7 percent

Actual reserves (R) = $73 billion

1. Compute the currency ratio (c), required reserve ratio (r), the excess reserve ratio (e) and the money multiplier for M1 (m1). [INSTRUCTION: Calculate using two decimal places]

2. What effect might a financial panic have on the money multiplier and the money supply? Why?

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