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29 January, 08:50

Assume that Linda deposits in her checking account the $1,000 cash she was keeping at home for an emergency. If the required reserve ratio is 0.20, what is the maximum change in the money supply from her deposit?

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  1. 29 January, 09:04
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    The answer is $5000

    Explanation:

    total change in MS = change in MB*MM

    Money multiplier = 1/0.2 = 5

    Therefore total change = 1000 * 5 = $5000
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