In a fractional reserve banking system, if the required reserve ratio is 10% and a bank receives a deposit of $1,000, how much money can the bank potentially create through loans using the money multiplier effect?

In a fractional reserve banking system, banks are required to keep a certain percentage of deposits as reserves and can loan out the rest. If the required reserve ratio is 10%, this means the bank must keep $100 of a $1,000 deposit as reserves. The remaining $900 can be loaned out to borrowers. This loaned money can then be deposited into the same or another bank, which can again loan out 90% of that amount, continuing the cycle. Using the money multiplier effect, which is calculated as 1 divided by the reserve ratio (1/0.