Answer:
The maximum amount a bank can lend depends on the reserve ratio.
Step-by-step explanation:
The money multiplier effect is the process that allows banks to multiply money from an initial amount of money.
Imagine that John makes a deposit of $ 1,000 in a bank, if the cash ratio is 10%, the bank will have to save 10% of that $ 1,000 ($ 100) and can lend $ 900 of that money to Mary. If Mary deposits it again in the bank, the bank saves 10% of the $ 900 deposited (90 dollars) and lends the remaining $ 810 to Norman, so on in a decreasing infinite series.
This is because banks are only required to keep a minimum level of money in their reserves. This minimum is called the reserve ratio and is determined by each central bank.