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# Answer to Question #72301 in Other Economics for Sam

Question #72301
ii) Suppose that a customer deposits \$7,000 into their bank account. Based on the simple money multiplier calculated in part i), calculate the final change in the money supply available in the banking system. (Part i answer is 6.25) iii) Calculate the final change in the money supply available in the banking system if the reserve ratio increases to 25%. Explain briefly how the money multiplier works.
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2018-01-09T05:04:53-0500
ii) If a customer deposits \$7,000 into their bank account and simple money multiplier is m = 6.25, then the final change in the money supply available in the banking system is 7,000/rr = 7,000/(1/m) = 7,000/(1/6.25) = \$43,750 (where m = 1/rr).

iii) If rr = 25%, then the final change in the money supply available in the banking system is \$7,000/0.25 = \$28,000.

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