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If the banking system has $15,000 of total reserves and a reserve requirement of 20%, the money supply can reach a maximum of
$30,000.
$65,000.
$75,000.
$150,000.
Do a little research on the Money Multiplier.
Try here.
http://en.wikipedia.org/wiki/Money_creation
c x 0.20 = 15,000
c x (1/5) = 15,000
c = 15,000 x 5
To find the maximum money supply, we need to use the concept of the money multiplier, which is the inverse of the reserve requirement.
The reserve requirement is given as 20%. This means that banks are required to hold 20% of their deposits as reserves and can lend out the remaining 80%.
The formula for the money multiplier is:
Money Multiplier = 1 / Reserve Requirement
In this case, the reserve requirement is 20%, so the money multiplier is:
Money Multiplier = 1 / 0.2 = 5
This means that for every dollar of reserves held by banks, the money supply can expand by a factor of 5.
Given that the banking system has $15,000 of total reserves, we can calculate the maximum money supply by multiplying the reserves by the money multiplier:
Maximum Money Supply = Total Reserves * Money Multiplier
= $15,000 * 5
= $75,000
Therefore, the maximum money supply that can be reached in this case is $75,000.
So, the correct answer is $75,000.