The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions.

-Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Question

The balance sheet below is for chartered bank ABC.Assume the desired reserve ratio is 20 percent.All figures are in billions.
 
-Refer to the above information.The amount by which this single chartered bank and the amount by which the banking system can increase loans are respectively:

Quizplus · Accepted Answer

The single chartered bank can increase loans by $5,000, which is the excess reserve. The banking system can increase loans by the money multiplier effect, which is calculated as the excess reserve ($5,000) times the money multiplier (assuming a reserve ratio of 20%, the multiplier is 5), resulting in $25,000.

The Balance Sheet Below Is for Chartered Bank ABC