Answer to Question #146657 in Economics for sana

Question

Q1)How is the money multiplier affected in each of the following cases?
a. Increase in Required Reserve Ratio
b. Increase in Currency Ratio(C/D)
c. Increase in Excess Reserve Ratio(ER/D)
d. Increase in the non-borrowed Monetary Base (MBn)
e. Increase in Discount Loans (DL) from the central bank

Answer 1

Q1)

a. Increase in Required Reserve Ratio

will cause money multiplier to decrease.

b. Increase in Currency Ratio(C/D) will cause money multiplier to decrease.

c. Increase in Excess Reserve Ratio(ER/D) will cause money multiplier to increase.

d. Increase in the non-borrowed Monetary Base (MBn) will cause money multiplier to increase.

e. Increase in Discount Loans (DL) from the central bank will cause money multiplier to increase.