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If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits, what is the maximum amount of loans that can be made by this bank
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If a bank has a required reserve ratio of 25 percent and there is $10,000 in deposits, what is the maximum amount of loans that can be made by this bank

User Adam Taylor
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1 Answer

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Answer: $40,000

Step-by-step explanation:

Based on the information given in the question, the maximum amount of loans that can be made by this bank will be calculated as:

= Deposit × 1/Reserve ratio

= $10000 × 1/25%

= $10000 × 1/0.25

= $10000 × 4

= $40000

Therefore, the maximum increase in money supply is $40000.

User Emulbreh
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