If a bank has $1 million in demand deposits,$350 000 in reserves,and desires a 30 percent reserve ratio,how much money could a bank directly create by loaning out its excess reserves?

Question

Quizplus · Accepted Answer

The bank has $1 million in demand deposits and $350,000 in reserves. It desires a 30 percent reserve ratio, which means it wants to hold $300,000 in reserves. It currently has $50,000 in excess reserves ($350,000 - $300,000). It can loan out this excess reserves and create $50,000 in new money.

If a Bank Has $1 Million in Demand Deposits,$350 000