Suppose a banking system has $100,000 in deposits,a required reserve ratio of 25 percent,and total bank reserves for the whole system of $25,000.Then the potential increase in deposit creation for the whole system is equal to

Question

Quizplus · Accepted Answer

With a required reserve ratio of 25% and total bank reserves of $25,000, the banking system is already holding exactly the amount of reserves required for the $100,000 in deposits. There is no excess reserve to support further deposit creation, so the potential increase in deposit creation is $0.

Suppose a Banking System Has $100,000 in Deposits,a Required Reserve