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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.