Explore BrainMass

Explore BrainMass

    Money Multiplier and Reserve Ratio

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    $27,000 is deposited into Bank C and the Reserve ratio is 23%

    This is what I have: $27,000 x 0.23 = 6210.00

    Here is where my problem is do I multiply the 6210.00 by 23% to calculate the deposit expansion multiplier for this Bank?

    Will it be like: 6210.00 x 0.23 = 1428.30 ?

    And the final step is to calculate the total amount of new money that will eventually be created by all bands due to the $27,000 initial deposit.

    Like 1428.30 x 0.23 = 328.5.

    © BrainMass Inc. brainmass.com October 9, 2019, 5:21 pm ad1c9bdddf

    Solution Preview

    The maximum value for the money multiplier is equal to the reciprocal of the reserve ...

    Solution Summary

    The solution explains the concept of money multiplier through a simple example.