1)How do minimum wages affect equilibrium price?

2)If the reserve requirement is 20% and a bank doesn't have excess reserves, why would a $100 deposit lead to a greater than $100 increase in the money supply?

1)In the case of price floor, the minimum wage is set above the equilibrium wage rate such that the quantity supplied of labor exceeds than the quantity demanded of labor in such a way that there exists a surplus of labor in an economy which creates the unemployment in an economy.

2)

Given -

• Reserve Requirement = 20%
• Total Deposit = $100

As a first step, we need to calculate the money multiplier.

• Money Multiplier = 1 / Reserve Required
• Money Multiplier = 1 / 0.20
• Money Multiplier = 5.00

Therefore,

• Increase in Money Supply = Deposit * Multiplier
• Increase in Money Supply = 100 * 5
• Increase in Money Supply = $500

A deposit of $100 would therefore result in a $500 increase in money supply.