Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r }
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information and assume that Moolah Bank is "loaned up." If it receives a $100 deposit of currency,the banking system of which Moolah is a part could expand loans by:
A) $100.
B) $90.
C) $900.
D) $1,000.

Question

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } 
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information and assume that Moolah Bank is "loaned up." If it receives a $100 deposit of currency,the banking system of which Moolah is a part could expand loans by:
A) $100.
B) $90.
C) $900.
D) $1,000.

Quizplus · Accepted Answer

The banking system can expand loans by the money multiplier effect. Assuming a reserve requirement of 10%, the initial $100 deposit can lead to a maximum loan expansion of $900 in the banking system.

Answer the Question on the Basis of the Following Information