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Imagine Federal Reserve Chairman Janet Yellen discovering a secret room in her office and finding $195 million stashed away during the Volcker era, when inflation was more of a concern. Suppose she decides to expand the money supply by depositing the whole $195 million in one commercial bank Now assume the following . The reserve ratio is 9.50% for all commercial banks Banks are fully loaned up initially. Any bank that has excess reserves will loan the entire amount of those excess reserves to one borrower, who will spend it all in one place, and the recipient will then deposit the entire amount in one bank How many loans would it take the banking system to create one billion dollars out of the money injection? Number loans

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