Money Multiplier Process
| Column 1 | Column 2 | Column 3 | Column 4 |
| Round | Deposit in Bank | Required Reserve | Loan made by Bank |
| 1 | 100.00 | 20.00 | 80.00 |
| 2 | 180.00 | 36.00 | 64.00 |
| - | - | - | - |
| - | - | - | - |
| - | - | - | - |
| - | - | - | - |
| - | - | - | - |
| Last | 500.00 | 100.00 | 400.00 |
The first column lists each round. The second column depicts the total deposits with the Bank at the beginning of each round. Twenty percent of these deposits need to be deposited with the RBI as required reserves (column 3). What the Bank lends in each round gets added to the deposits with the bank in the next round. Column 4 indicates the Loans made by the banks.
How much is the initial deposit in the above Money Multiplier process table ?
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : 100.00
The initial deposit is the amount listed in the first row under "Deposit in Bank," which is 100.00