Reference: Ref 15-2 (Table: Multiple Deposit Expansion) For the multiple deposit expansion process described in this table, what is the maximum amount of loans that the Third National Bank can make if it decides to hold 1 percent of deposits as excess reserves?
A) $338,560
B) $30,470.40
C) $308,089.60
D) $311,475.20

Question

Reference: Ref 15-2 (Table: Multiple Deposit Expansion) For the multiple deposit expansion process described in this table, what is the maximum amount of loans that the Third National Bank can make if it decides to hold 1 percent of deposits as excess reserves?
A) $338,560 
B) $30,470.40 
C) $308,089.60 
D) $311,475.20

Quizplus · Accepted Answer

According to the table, the total increase in deposits is $3,088,960. If the Third National Bank decides to hold 1 percent of deposits as excess reserves, then it will hold $30,889.60 in reserve. Therefore, the maximum amount of loans it can make is $3,058,070.40 ($3,088,960 - $30,889.60), which is option C.

Reference: Ref 15-2 (Table: Multiple Deposit Expansion) for the Multiple