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# Money Multiplier and Reserve Ratio

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\$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.

##### Solution Summary

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

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

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