If the reserve ratio is 10 percent,$1,000 of additional reserves can create

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If the reserve ratio is 10 percent, this means that banks are required to hold 10 percent of their deposits as reserves and can lend out the rest. Therefore, $1,000 of additional reserves can support $10,000 of new loans (since banks can lend out 90 percent of deposits). This new lending creates new deposits and expands the money supply by $10,000.

If the Reserve Ratio Is 10 Percent,$1,000 of Additional Reserves