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If the money multiplier is 4 what is the required service ratio?
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What accurately describes how lowering the required reserve ratio increases the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
What are the determinants of money supply in an economy?
Main determinants of the supply of money are (a) monetary base and (b) the money multiplier. These two broad determinants of money supply are, in turn, influenced by a number of other factors. Various factors influencing the money supply are discussed below:1. Monetary Base:Magnitude of the monetary base (B) is the significant determinant of the size of money supply. Money supply varies directly in relation to the changes in the monetary base.Monetary base refers to the supply of funds available for use either as cash or reserves of the central bank. Monetary base changes due to the policy of the government and is also influenced by the value of money.2. Money Multiplier:Money multiplier (m) has positive influence upon the money supply. An increase in the size of m will increase the money supply and vice versa.3. Reserve Ratio:Reserve ratio (r) is also an important determinant of money supply. The smaller cash-reserve ratio enables greater expansion in the credit by the banks and thus increases the money supply and vice versa.Reserve ratio is often broken down into its two component parts; (a) excess reserve ratio which is the ratio of excess reserves to the total deposits of the bank (re = ER/D); (b) required reserve ratio which is the ratio of required reserves to the total deposits of the bank (rr = RR/D). Thus r = re + rr. The rr ratio is legally fixed by the central bank and the re ratio depends on the market rate of interest.4. Currency Ratio:Currency ratio (c) is a behavioural ratio representing the ratio of currency demand to the demand deposits.The effect of the currency ratio on the money multiplier (m) cannot be clearly recognised because enters both as a numerator and a denominator in the money multiplier expression (1 + c/r(1 +t) + c). But, as long as the r ratio is less than unity, a rise in the c ratio must reduce the multiplier.5. Confidence in Bank Money:General economic conditions affect the confidence of the public in bank money and, thereby, influence the currency ratio (c) and the reserve ratio (r). During recession, confidence in bank money is low and, as a result, c and r ratios rise. Conversely, during prosperity, c and r ratios tend to be low when confidence in banks is high.6. Time-Deposit Ratio:Time-deposit ratio (t), which represents the ratio of time deposits to the demand deposits is a behavioural parameter having negative effect on the money multiplier (m) and thus on the money supply. A rise in t reduces m and thereby the supply of money decreases.7. Value of Money:The value of money (1/P) in terms of other goods and services has positive influence on the monetary base (B) and hence on the money stock.8. Real Income:Real income (Y) has a positive influence on the money multiplier and hence on the money supply. A r se in real income will tend to increase the money multiplier and thus the money supply and vice versa.9. Interest Rate:Interest rate has a positive effect on the money multiplier and hence on the money supply. A rise in the interest rate will reduce the reserve ratio (r), which raises the money multiplier (m) and hence increases the money supply and vice versa.10. Monetary Policy:Monetary policy has positive or negative influence on the money multiplier and hence on the money supply, depending upon whether reserve requirements are lowered or raised. If reserve requirements are raised, the value of reserve ratio (r) will rise reducing the money multiplier and thus the money supply and vice versa.11. Seasonal Factors:Seasonal factors have negative effect on the money multiplier, and hence on the money stock. During holiday periods, the currency ratio (c) will tend to rise, thus, reducing the money multiplier and, thereby, the money supply.
What describes how lowering the required reserve ratio reduces the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
Ratio of change in GDP to an initial change in aggregate expenditures what?
Spending multiplier
What is the relationship between high powered money and money multiplier?
The monetary base is highly liquid money that consists of coins, paper money (both as bank vault cash and as currency circulating in the public), and commercial banks' reserves with the central bank. The Fed can control the monetary base much more precisely than it can control reserves, so it makes sense to model the money supply process by linking the money supply to the monetary base. The money multiplier links the money supply M to the monetary base MB via M = m × M B where m = money multiplier. m > 1, so that a $1 increase in M B leads to an increase in M of more than $1. For this reason, the monetary base is often called high-powered money. m will depend on depositors' decisions about holdings of currency and banks' decisions about holdings of excess reserves. Precisely m = (1 + c)/ (r + e + c) Since, according to our formula, m = (1 + c)/ (r + e + c) it appears that the money multiplier m is determined by three factors: 1. The required reserve ratio r. 2. The currency ratio c. 3. The excess reserve ratio e.
If the money multiplier is 4, what is the required reserve ratio (RRR)?
25 percent
What describes how Lowering the required ratio increases the money supply?
Makes the deposit multiplier bigger. - Dustin SELU
What accurately describes how Lowering the required ratio increases the money supply?
Makes the deposit multiplier bigger. - Dustin SELU
What accurately describes how lowering the required reserve ratio increases the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
If the currency drain ratio is 0.38 and desired reserve ratio is 0.002 what is the UK money multiplier?
3.612
What are the determinants of money supply in an economy?
Main determinants of the supply of money are (a) monetary base and (b) the money multiplier. These two broad determinants of money supply are, in turn, influenced by a number of other factors. Various factors influencing the money supply are discussed below:1. Monetary Base:Magnitude of the monetary base (B) is the significant determinant of the size of money supply. Money supply varies directly in relation to the changes in the monetary base.Monetary base refers to the supply of funds available for use either as cash or reserves of the central bank. Monetary base changes due to the policy of the government and is also influenced by the value of money.2. Money Multiplier:Money multiplier (m) has positive influence upon the money supply. An increase in the size of m will increase the money supply and vice versa.3. Reserve Ratio:Reserve ratio (r) is also an important determinant of money supply. The smaller cash-reserve ratio enables greater expansion in the credit by the banks and thus increases the money supply and vice versa.Reserve ratio is often broken down into its two component parts; (a) excess reserve ratio which is the ratio of excess reserves to the total deposits of the bank (re = ER/D); (b) required reserve ratio which is the ratio of required reserves to the total deposits of the bank (rr = RR/D). Thus r = re + rr. The rr ratio is legally fixed by the central bank and the re ratio depends on the market rate of interest.4. Currency Ratio:Currency ratio (c) is a behavioural ratio representing the ratio of currency demand to the demand deposits.The effect of the currency ratio on the money multiplier (m) cannot be clearly recognised because enters both as a numerator and a denominator in the money multiplier expression (1 + c/r(1 +t) + c). But, as long as the r ratio is less than unity, a rise in the c ratio must reduce the multiplier.5. Confidence in Bank Money:General economic conditions affect the confidence of the public in bank money and, thereby, influence the currency ratio (c) and the reserve ratio (r). During recession, confidence in bank money is low and, as a result, c and r ratios rise. Conversely, during prosperity, c and r ratios tend to be low when confidence in banks is high.6. Time-Deposit Ratio:Time-deposit ratio (t), which represents the ratio of time deposits to the demand deposits is a behavioural parameter having negative effect on the money multiplier (m) and thus on the money supply. A rise in t reduces m and thereby the supply of money decreases.7. Value of Money:The value of money (1/P) in terms of other goods and services has positive influence on the monetary base (B) and hence on the money stock.8. Real Income:Real income (Y) has a positive influence on the money multiplier and hence on the money supply. A r se in real income will tend to increase the money multiplier and thus the money supply and vice versa.9. Interest Rate:Interest rate has a positive effect on the money multiplier and hence on the money supply. A rise in the interest rate will reduce the reserve ratio (r), which raises the money multiplier (m) and hence increases the money supply and vice versa.10. Monetary Policy:Monetary policy has positive or negative influence on the money multiplier and hence on the money supply, depending upon whether reserve requirements are lowered or raised. If reserve requirements are raised, the value of reserve ratio (r) will rise reducing the money multiplier and thus the money supply and vice versa.11. Seasonal Factors:Seasonal factors have negative effect on the money multiplier, and hence on the money stock. During holiday periods, the currency ratio (c) will tend to rise, thus, reducing the money multiplier and, thereby, the money supply.
What describes how lowering the required reserve ratio reduces the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
What happens to the credit multiplier when the cash reserve ratio is increased?
The credit multiplier decreases.
What is meant by Earnings multiplier?
P/E Ratio
What is the equity multiplier if a company has a debt equity ratio of 1.40 return assets is 8.7 persent and total equty is 520000?
The equity multiplier = debt to equity +1. Therefore, if the debt to equity ratio is 1.40, the equity multiplier is 2.40.
What is the maximum amount that the money supply can be expanded?
you find the monetary multiplier by dividing 1 with the reserve ratio. (1/RR) then you multiply that with the excess reserves.
If a company has an equity multiplier of 2.4 what is its debt ratio?
1.4
