A commercial bank has checkable-deposit liabilities of $500,000, reserves of $150,000, and a required reserve ratio of 20 percent. The amount by which a single commercial bank and the amount by which the banking system can increase loans are respectively:

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The bank must hold 20% of $500,000 as reserves, which is $100,000. With $150,000 in reserves, it has $50,000 in excess reserves to lend. The banking system can increase loans by a multiple of the excess reserves, calculated as excess reserves divided by the reserve ratio (0.20), which is $250,000.

A Commercial Bank Has Checkable-Deposit Liabilities of $500,000, Reserves of $150,000