Homework Answers
Answer - For calculating the maximum increase , money multiplier will be needed.
Money multiplier = 1/ reserve ratio
Reserve ratio = Reserve / Deposits * 100
Reserves = 100000 - 20000-8000-16000
= $ 56000
Reserve ratio = 56 %
Money multiplier = 1/0.56
= 1.78
Excess reserves = $ 60
Total increase = 60*1.78
= 106.8
Hence the actual amount created through $ 60 of excess reserves = $ 106.8
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