Use the following example to answer the questions that follow.
Imagine that you deposit $25,000 in currency (which you had been storing in your closet) five into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%.
-As a result of this deposit,what is the maximum amount in loans that all the banks in the banking system can make?

Question

Quizplus · Accepted Answer

The maximum amount of loans that can be made is determined by the money multiplier, which is 1 divided by the reserve ratio (1/0.25 = 4). The initial deposit of $25,000 can lead to a maximum increase in loans of $25,000 * 4 = $100,000.

Use the Following Example to Answer the Questions That Follow