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    Money Multiplier

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    1. Assuming individuals hold no currency, calculate the simple money multiplier using the following reserve ratios:
    5%, 10%, 20%, 25%, 50%

    2. What is the impact of these ratios on the level of new money that can be created given a $100,000 cash deposit into the banking system?

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    Solution Summary

    This solution looks at the simple money multiplier and the impact on the level of new money.