Final answer:
A $10,000 deposit from Mr. Brown in checkable deposits could create $8,000 worth of new money for the entire banking system, given a 20% required reserve ratio and the assumption that all banks loan out their excess reserves.
Step-by-step explanation:
In this scenario, the required reserve ratio is 20 percent, and all banks loan out all of their excess reserves. Given a $10,000 deposit from Mr. Brown in checkable deposits, we can calculate the potential creation of new money in the entire banking system based on the reserve ratio and the deposit amount.
The required reserve ratio of 20% means that banks must hold 20% of their deposits as reserves and can loan out the rest. Therefore, only $2,000 ($10,000 x 0.2) of the deposit is required to be held as reserves, leaving $8,000 ($10,000 - $2,000) available for loans.
Since every bank in the banking system loans out all of its excess reserves, the $8,000 available for loans can be loaned out by each bank, resulting in a total of $8,000 worth of new money created in the entire banking system.