Suppose a banking system has $200 million in deposits,a required reserve ratio of 10 percent,and total bank reserves of $35 million.Then the potential increase in deposit creation for the whole banking system is equal to

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Quizplus · Accepted Answer

The potential increase in deposit creation for the whole banking system is given by the formula: (1/required reserve ratio) x excess reserves. In this case, the required reserve ratio is 10%, so the excess reserves are $35 million - ($200 million x 10%) = $15 million. Therefore, the potential increase in deposit creation is (1/10%) x $15 million = $150 million. So, the correct answer is C.

Suppose a Banking System Has $200 Million in Deposits,a Required