Question 1) The Central Bank is deciding on what reserve requirement would be appropriate for the country. The table below illustrates a few numbers. Reserve Requirement Potential Money Multiplier Actual Money Multiplier 50.0% 33.3% 25.0% 20.0% 10.0% a) What is the difference between the potential money multiplier and the actual money multiplier? b) Calculate the potential money multipliers and remember to show all of your calculations. c) Assuming that banks hold 4% more reserves than what is legally required, individuals hold 3% more cash instead of deposits at the bank, businesses hold 5% more cash instead of deposits at the bank, and foreign entities hold 1% more cash, calculate the actual money multipliers and remember to show all of your calculations.

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