Macroeconomics help (Reserves, Deposits, Loans, Money Supply, Money Multiplier...)

Posted on 2014-04-03 11:34:00 in Economics by PO ?

My assignment has a question:

Table 29-5

Bank of Spring field

Assets: Reserves $12000, Loans $228000,

Liabilities: Deposits $240000



Assume that all other banks hold only the required 4 percent of deposits as reserves and that people hold only deposits and no currency. If the Bank of Springfield decides to hold reserves of 4 percent, by how much would the economy's money supply increase?

A, $50200

B, $60000

C, $65400

D, $72000



Please explain to me how to calculate that "money supply".

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