Relationship between
Explanation of Solution
The
The simple deposit multiplier is positively related to money supply. The simple deposit multiplier is the reciprocal of cash reserve ratio. Commercial banks hold certain fraction of deposit and lend the remaining amount for loan purpose, it is known as simple deposit multiplier. When the economy’s money supply is higher, simple deposit multiplier increases.
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Chapter 13 Solutions
Macroeconomics (Book Only)
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning