Suppose that the target money reserve ration in the banking system is 20 percent, there is no cash drain, and all excess reserves are lent out.

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Suppose that the target money reserve ration in the banking system is 20 percent, there is no cash drain, and all excess reserves are lent out. If Sam deposits a $50 bill in his bank account, then the money supply(M1) will increase by $200. Why?

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