Assets liabilities and net worth
reserves $51
checkable deposits $140
loans 109
stock shares 130
securities 100
property 10
refer to the accompanying consolidated balance sheet for the commercial banking system. assume the required reserve ratio is 30 percent. all figures are in billions. the maximum amount by which the commercial banking system can expand the supply of money by lending is

The correct answer is $30 billions.

Explanation:

The checkable deposits are given as $140 billions.

The total reserves are $51 billions.

The required reserve rate is 30%.

The required reserves will be

=30% of $140 billions

=

=$42 billions

The excess reserves will be

=total reserves-required reserves

=$51-$42

=$9 billions

Maximum expansion by lending will be

=

=

=$30 billions

So, the money supply can be expanded by a maximum amount of $30 billions.

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