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If the required reserve ratio is 8% and the Fed loans $1,500 to the bank, the...

If the required reserve ratio is 8% and the Fed loans $1,500 to the bank, the total amount new money that will be created is ______.

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Answer #1

Solution:-

Money Multiplier = 1 / Required Reserve Ratio

                                = 1 / 0.08

                                = 12.5

Total amount new money that will be created = $1500 * 12.5

                                                                       = $18,750

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