Exhibit 15-7 Lower Walloon National Bank
Assets
Liabilities
Reserves$10,000
Checkable deposits$10,000
In Exhibit 15-7, if the required reserve ratio is 20 percent for all banks, and every bank in the banking system loans out all of its excess reserves. Then a $10,000 deposit from Mr. Brown in checkable deposits could create for the entire banking system:
A. $8,000 worth of new money.
B. $2,000 worth of new money.
C. $10,000 worth of new money.
D. $40,000 worth of new money.
Answer: D
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