Maximum checkable-deposit expansion in the banking system is equal to:
A) Actual reserves minus required reserves
B) Assets plus net worth and liabilities
C) Excess reserves times the monetary multiplier
D) Excess reserves divided by the monetary multiplier

Question

Quizplus · Accepted Answer

The maximum checkable-deposit expansion is the excess reserves times the monetary multiplier. The monetary multiplier is a function of the reserve requirement ratio. To calculate the maximum checkable-deposit expansion, we multiply the excess reserves by the monetary multiplier (which is calculated as 1/required reserve ratio). Therefore, answer C is the correct choice.

Maximum Checkable-Deposit Expansion in the Banking System Is Equal To