Suppose that Wisconsin National Bank has actual reserves of $100,000, checking account deposits of $300,000 and the required reserve ratio is 20 percent. The bank is allowed to increase its loans by

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With a required reserve ratio of 20%, the bank must hold $60,000 (20% of $300,000) in reserves. Since it has actual reserves of $100,000, it has $40,000 in excess reserves ($100,000 - $60,000), which it can use to increase its loans.

Suppose That Wisconsin National Bank Has Actual Reserves of $100,000