$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
The maximum value for the money multiplier is equal to the reciprocal of the reserve ...
The solution explains the concept of money multiplier through a simple example.