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

The banking system already has $25,000 in reserves, which is exactly 25% of the $100,000 in deposits, meeting the required reserve ratio. Therefore, there is no excess reserve to support additional deposit creation.

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