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Macroeconomics

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Money Creation: Rounds of the Money Multiplier

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Consider the following table that illustrates the money multiplier process. Assume there is no cash drain, a reserve ratio of $10\%$, and commercial banks are fully loaned-up.

Round Change in Deposits Change in Reserves Change in Loans
1 1,000 A 900
2 900 90 B
3 810 81 729
Remaining rounds D 729 6,561
All rounds C 1,000 9,000