Assume that the Required Reserve Ratio in Ecoland is 5%. A $100 deposit will create:

Assume that the Required Reserve Ratio in Ecoland is 5%.

A $100 deposit will create _______ worth of new money in Ecoland’s economy.

ANSWER:  $1900

1/.05=20
100*(1-0.05)=95
95*20=1900

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