Explain why the actual increase in m-1 will be smaller

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Reference no: EM13151426

Assume that the banking system is subject to a legal reserve ratio of 10% and that a customer of bank A deposits $20,000 in her checking account a.use the concept of the over smplified " money multiplier" to calculate the total increase in depositis as well as the total increase in M-1. show the work

B. explain why the actual increase in M-1 will be smaller than that indicated by the over smplified multiplier.

Reference no: EM13151426

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