If the target reserve ratio in the banking system is 1 percent, there is no cash drain, and there are no excess reserves, a new deposit of $1 will lead to an expansion of the money supply of

Question

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The money multiplier is the inverse of the reserve ratio. With a reserve ratio of 1%, the money multiplier is 1/0.01 = 100. Therefore, a new deposit of $1 can lead to an expansion of the money supply by $100.

If the Target Reserve Ratio in the Banking System Is