Business, 03.05.2021 16:50 smkw04p3ao0n

Suppose that in 2020, for every $10 of disposable income, households put $9 in deposits with a bank and keep $1 as cash. Banks keep twice as much reserves as households keep for themselves in cash. Suppose that in 2021, retail stores no longer accept cash and instead only accept credit cards and peer-to-peer payment systems such as Venmo/Zelle. In response, consumers realize it is no longer useful to carry cash around, so no household does. As a result, banks decide it is best to hold more reserves, and now only loan out 70% of their liabilities. Assume there are no other financial capital or assets. The money multiplier in 2020 is:

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Suppose that in 2020, for every $10 of disposable income, households put $9 in deposits with a bank...

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