Bigtown Bank has total deposits of $900 million and total reserve of $150 million. It is subject to a required reserve ratio of 15%. What is the maximum amount of additional loans that Bigtown Bank could lend out today?

Question

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The maximum amount of additional loans that Bigtown Bank could lend out today is $15 million. This is calculated as follows:Excess reserves = Total reserves - Required reserves= $150 million - (0.15 x $900 million)= $15 million

Bigtown Bank Has Total Deposits of $900 Million and Total