Calculate the Money Multiplier Excess Reserves Required Rese

Calculate the Money Multiplier, Excess Reserves, Required Reserves and Total Potential Deposit Creation given the following information. rrr = .09 Total Deposits: $6300 Total Reserves: $4200

Solution

Money multipler = 1 divided by reserve ratio = 1/0.09 = 100/9 = 11.11

Required reserves = 9% of 6300 = 6300*0.09 = 567

excess reservies = total reserves - required reserves - 4200-567 = 3633

total potential deposti creation = total deposits multiplied by money multiplier = 6300*100/9 = 70000