Answer:
money supply = 32 million
Explanation:
The reserve requirement is the money banks keep in their vaults against the deposited money.
The supply of money is affected by reserves and the supply of money can be increased if we lower the reserve requirements.
The money supply is calculated as
money supply = deposits*money multiplier
Where money multiplier is ( 1/ % of reserve requirement)
money supply = deposits*( 1 / % of reserve requirement)
money supply = 1600000*( 1/0.05)
money supply = 32000000
money supply = 32 million
Answer: $32 million
Explanation:
Money supply = deposits*( 1 / % of reserve requirement)
Hence:
1600000*( 1/0.05) = 32,000,000
