Assume that $1 million is deposited in a bank with a reserve requirement of 15 percent.

a. what is the money supply as a result?

We are given with the principal amount of $1 million and is asked in the problem to calculate for the money supply given the reserve ratio is 15%. The formula that is applicable to this problem is F = P / r where P is the principal amount, r is the ratio and F is the future / money supply. In this case, upon substitution, F = $1 m million / 0.15 = $6.67 million. The money put into reserve is expected to increase after putting into reserve. The lower the reserve ratio, the higher the money supply will be. Conversely, the higher the principal amount, the higher the money supply.