Discussion: Federal Reserve's Reserve Requirement Ratio
Suppose that households wished to maintain $1.00 in pocket money (currency and coin) and $10.00 in liquid savings assets (small CDs, money funds, and savings accounts) for every $1.00 in their checking accounts (transaction deposits). If banks choose their desired reserves to be ten cents for every dollar of transaction deposits, what are the reserve multiplier and the money (M2) multiplier if the Federal Reserve's reserve requirement ratio is: (a) 8 percent; 10 percent; and (c) 12 percent?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.