Demand deposit multiplier and reserve ratio
When banks have no excess reserves, the reserve ratio is 0.1 and the demand deposit multiplier is 10. This means that the banks required reserve is 10% of their deposits.
However, what is the multiplier when including both the excess and required reserves?
For part (b) you would use the multiplier that you have obtained in part (a) and also keep in mind the the 5% in excess reserves the banking system has.
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