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If the reserve requirement is 20 percent and a monetary expansion increases reserves in the banking system by $10 million, the total change in the money supply after all rounds of lending are completed is ________.

Sagot :

The total change in the money supply after all rounds of lending are completed is $50 million.

The reserve requirement is the percentage of deposits that banks must keep as reserves as mandated by the Central Bank of that country.

The formula that can be used to determine the total change in money supply = increase in money supply / reserve requirement

$10 million / 20%

$10 million / 0.2 = $50 million

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