Assignment: Money Supply
1. You deposit $2,000 into your checking account at ABC bank. The Reserve Ratio is 20%.
A) Make a T-account showing the deposit and the bank making a loan
B) Using the money multiplier, how much will the money supply increase because of the $2,000 deposit?
2. If the money supply is growing at a rate of 6% per year, real GDP is growing at a rate of 3% per year and velocity is constant, what will the inflation rate be?