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Macroeconomics

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Rounds of the Money Multiplier Process

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Consider the following table that illustrates the money multiplier process. Assume there is no cash drain ($d=0$), and commercial banks are fully loaned-up.

Round Change in Deposits Change in Reserves Change in Loans
1 500 25 475
2 475 23.75 451.25
3 451.25 22.5625 428.69
Remaining rounds 8573.75 428.68 8145.06