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Suppose that the required reserve ratio is 7.00 %. What is the simple money (deposit) multiplier? Round to two decimal places.

money multiplier: _________
Increasing the reserve ratio will ___(increase / decrease)___ the money multiplier.

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The simple money multiplier is calculated as

Money Mutilplier = 1 / required reserve ratio

Money Multiplier = 1 / 0.07

Money Multiplier = 14.29

Increasing the reserve ratio will decrease the Money Mutilplier.

Money Mutilplier and reserve ratio has inverse relationship between them i.e increasing the reserve ratio will decrease the money Mutilplier and vice versa. Because the reserve ratio is in the denominator of the fraction, an increase in the reserve ratio decreases the multiplier.

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