Final answer:
The maximum money the banking system can create from a $55,000 deposit using the money multiplier is based on the required reserve ratio, which dictates the potential increase in money supply through subsequent deposits and lending.
Step-by-step explanation:
The maximum amount in new deposits and loans that the banking system can generate as a result of the $55,000 deposit into Goldstar Bank depends on the money multiplier effect in a multibank system. When one bank makes a loan, like the initial $55,000 deposit, this money is likely to be deposited by the borrower into another bank account, increasing the total money supply as the process repeats.
For example, if Jack's deposits an $8.1 million loan into Second National, the money supply increases by that amount. To determine the precise maximum expansion of the money supply, we would need to know the required reserve ratio, which indicates what fraction of deposits banks are required to hold as reserves. With this, we could apply the money multiplier formula: 1 / required reserve ratio. If the required reserve ratio was, say, 10% (or 0.1), then the money multiplier would be 1 / 0.1 = 10. The initial $55,000 could potentially lead to a maximum increase in the money supply of $550,000. However, this is a simplified example, and in actual banking, factors such as currency held by the public and excess reserves held by banks will influence the final value.