If Bank A has excess reserves of $1 million and all other banks in the system do not have any excess reserves, then the amount of additional loans that can be made by the banking system will be:
A) $1 million also
B) A fraction of $1 million
C) A multiple of $1 million
D) $1 million times the required-reserve ratio

Question

Quizplus · Accepted Answer

The banking system can create a multiple of the initial excess reserves through the money multiplier effect, which depends on the reserve requirement ratio.

If Bank a Has Excess Reserves of $1 Million and All