Think about making deposits at a commercial bank. If that bank has no excess reserves and the requirement is 20 percent, how much money would be created in new loans from all banks after this bank gets a deposit of $15,000?
Explanation
Answer - A - In this scenario, $60,000 would be created in new loans from all banks after this bank gets a deposit of $15,000.
Key Takeaway: To figure out this problem, first figure out how much the bank would keep: 20% of $15,000, which would be $3,000. They could, therefore, lend out the remaining $12,000. You would then multiply this by the money multiplier, which is 5, to get the total of $60,000.
