MONEY MULTIPLIER - operation will equal (ATR x (1/rr)): ADD...

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MONEY MULTIPLIER  The factor by which a change in total reserves changes the Ml money  supply.   The   money   multiplier   equals   the   reciprocal   of   the   reserve  requirement ratio (1/rr). Therefore, the change in demand deposits ( ADD)  resulting from a change in total reserves ( ATR) from an open market 
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Unformatted text preview: operation will equal (ATR x (1/rr)): ADD = ATR x (1/rr) where (1/rr) is the money multiplier. If the reserve requirement ratio is 10 %, then the value of this money multiplier is (1/.10) = 10. Therefore, a $1 increase in total bank reserves will have a $10 impact on demand deposits....
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