A commercial bank holds $500,000 in demand deposit liabilities and $120,000 in reserves. If the required reserve ratio is 20 percent, which of the following is the maximum amount by which this single commercial bank and the maximum amount by which the banking system can increase loans?
a) amount created by single bank = $5,000 and amount created by banking system = $25,000
b) acsb=$20,000 and acbs=$80,000
c) acsb=$20,000 and acbs=$100,000
d) acsb=$0,000 and acbs=$150,000
e) acsb=$120,000 and acbs=$500,000
Ans: c) acsb=$20,000 and acbs=$100,000
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