Posted: September 17th, 2017
The Potential Money Multiplier
Read the scenario below, and then answer questions 1 and 2.
Scenario: Bank A has an increase in deposits (or excess reserves) of $100M and the reserve requirement is 10% with other banks not holding reserves beyond the requirement.
1. How much money can Bank A create by making loans?
2. How much money can the banking system as a whole create? (Show calculation).
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