What is known as the maximum lending potential

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Suppose in the banking system as a whole, demand deposits are equal to $80,000,000 and reserves are equal to $17,000,000 with a legal reserve ratio of 10%. If the Fed doubles the required ratio, by how much will the money-creating potential (also known as the maximum lending potential) of the banking system as a whole drop?

Reference no: EM13242648

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