If the banking system has demand deposits of $200,000,total reserves equal to $60,000,and a required reserve ratio of 25 percent,the banking system can increase the volume of loans by a maximum of

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The required reserves are 25% of $200,000, which is $50,000. With total reserves of $60,000, the excess reserves are $10,000. Using the money multiplier (1/required reserve ratio), which is 4, the maximum increase in loans is $10,000 * 4 = $40,000.

If the Banking System Has Demand Deposits of $200,000,total Reserves