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why do total reserves always equal the value of 1? define the money multiplier (mm) in words and mathematically. explain why banks have a very strong incentive to loan out all excess reserves. how do we calculate a change in the money supply? (write out the equation). assuming a fed injection of money into the economy. calculate the blanks in the following table

Sagot :

The reserve ratio is the percentage of total reserves that a bank has in deposit with the central bank. Since the reserve ratio is less than 1, the money multiplier is necessarily greater than 1.

A one-dollar increase in the monetary base increases the money supply by more than one dollar. An increase in the money supply is the money multiplier. 1. A currency multiplier indicates how many times a loan is issued in an economy and then multiplied when reinvested in another bank.

The money multiplier is then multiplied by the change in excess reserves to determine the total amount of M1 money created in the banking system. The money multiplier indicates the maximum amount by which the money supply can increase due to an increase in the banking system's reserves.

Learn more about The money multiplier here:- https://brainly.com/question/4412587

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