Banks can increase deposits in the entire system

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Reference no: EM13981036

Suppose commercial banks have no excess reserves. Then new deposits totaling $1 billion come into the banking system. If the required reserve ratio is 20 percent, what is the maximum amount by which banks can increase deposits in the entire system?

A. $0.5 billion

B. $5.0 billion

C. $2.0 billion

D. $2.5 billion

Reference no: EM13981036

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