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12 May, 14:18

If the banking system has $50 billion in excess reserves and the reserve ratio is 25 percent, the system's potential deposit creation is:

a. $200 billion.

b. $150 billion.

c. $75 billion.

d. None of the above.

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Answers (1)
  1. 12 May, 14:45
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    Answer: A. $200 billion

    Explanation: 25% of $200 billion = $50 billion

    ($200) (.25) = $50

    Multiply the $200 billion by 25% and the answer will be what is left, $50 billion.
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