The Money Multiplier Process

Initial deposit ($100)

University Bank: Excess reserves: $25 Required reserves

#2 Loan Deposit: Excess reserves: $6.25 Required reserves: $18.75

#3 Loan Deposit: Excess reserves: $1.56 Required reserves: $4.69

#4: Excess reserves: $0.39 Required reserves: $1.17

Instructions: Round response to two decimal places.

a. What volume of loans can the banking system in the figure support? 33.20 answer

b. If the reserve requirement were 50 percent rather than 75 percent, what would the system's lending capacity be? ________