A bank currently has $100,000 in checkable deposits and $15,000 in actual reserves. If the reserve ratio is 20 percent, the bank has in money-creating potential. If the reserve ratio is 14 percent, the bank has in money-creating potential. multiple choice

A bank currently has $100,000 in checkable deposits and $15,000 in actual reserves. If the reserve ratio is 20 percent, the bank has __$80,000__ in money-creating potential. If the reserve ratio is 14 percent, the bank has ___$86,000__ in money-creating potential.

Explanation:

a) Data and Calculations:

Checkable deposits = $100,000

Actual reserves = $15,000

Required reserves = $20,000 ($100,000 * 20%)

Excess reserves = -$5,000 ($15,000 - $20,000)

Money-creating potential = $80,000 ($100,000 - $20,000)

Total amount of money the bank can create = $500,000 ($100,000/20%)

b) Checkable deposits = $100,000

Actual reserves = $15,000

Required reserves = $14,000 ($100,000 * 14%)

Excess reserves = $1,000 ($15,000 - $14,000)

Money-creating potential = $86,000 ($100,000 - $14,000)

Total amount of money the bank can create = $714,286 ($100,000/14%)

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