A Simple Deposit Multiplier of 10 Suggests That a One-Time

question 27

Essay

A simple deposit multiplier of 10 suggests that a one-time bank deposit of $100,000 will lead to an expansion of the money supply 10 times larger, or a $1,000,000 expansion of the money supply. Identify and explain two real-world problems with this theoretical analysis that could cause the money supply to expand less than that.

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