1. assume the reserve requirement is 10%. first national bank receives a deposit of $5,400. if there is no slippage, how much could the money supply expand? explain and show your work. (3 points for correct math. 7 points for analysis)

Money supply will increase by $54,000

Explanation:

Required reserve ration or r= 10% = 0.10

Initial deposits = $5400

We use the money multiplier formula to find out the value of the multiplier. It is given by,

Money multiplier shows us how much does the supply of money change for a change in the deposits. So, using the value of the multiplier = 10, we have change in money supply of,

Thus, the money supply in the economy will increase by $54,000

3x3 = 9 and 2x2 = 4

step-by-step explanation:

answer: a.

step-by-step explanation: the answer is a. because, you need to converge the fractions to find a solution.