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Economics

Money Multiplier Effect

Quick fact

With a 10% reserve requirement, the theoretical money multiplier is 10, meaning an initial $1,000 deposit could ultimately support $10,000 in new money through the banking system.

Why this is interesting

When you deposit $100 in a bank, did you know that bank can create up to $900 more in the economy? How does a single deposit multiply into a loan cascade that expands the entire money supply?