Scenario 2

Scenario 2:
Initial Deposit =
5,000
Reserve requirement =
40%
Money Multiplier =
2.5
How many banks will it take to go through the multiplier process?
19
What will the Total New Deposits be?
12500
How much in Total Excess Reserves will there when the multiplier process
7500 completes?
How much money will be created?
7500
Bank
New
Required Excess
number Deposits Reserves Reserves
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

5,000
3,000
1,800
1,080
648
389
233
140
84
50
30
18
11
7
4
2
1
1
1
0

2000
1200
720
432
259.2
155.52
93.312
55.9872
33.59232
20.155392
12.093235
7.2559411
4.3535647
2.6121388
1.5672833
0.94037
0.564222
0.3385332
0.2031199
0.1218719

3,000
1,800
1,080
648
389
233
140
84
50
30
18
11
7
4
2
1
1
1
0
0