If a bank has $1 million in demand deposits, $350,000 in reserves, and faces a 30 percent reserve requirement, the amount of money that a bank could initially create by loaning out their excess reserves is:

Question

Quizplus · Accepted Answer

With $1 million in demand deposits and a 30% reserve requirement, the bank needs to hold $300,000 in reserves. It already has $350,000, so the excess reserves, which can be loaned out, are $350,000 - $300,000 = $50,000.

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