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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Definitions:

Convergent Thinking

A thought process that narrows in on a single, correct solution to a problem, emphasizing analytical and logical reasoning.

Divergent Thinking

A thought process or method used to generate many creative ideas by exploring many possible solutions, often in a spontaneous, free-flowing manner.

Final Topic

The ultimate subject or theme that has been chosen for study or discussion.

Creativity

The ability to produce original, diverse, and valuable ideas or solutions.