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?

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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? 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?

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MoneySupply-H….docx