Suppose the public holds $500 cash and the monetary base is $1000. The required reserve ratio is 25%. If all the banks are fully loaned up, what will be the amount of deposits?

Monetary base = Cash in hand + Demand deposits

=> Demand deposits = Monetary base - Cash in hand

= 1000 - 500

= 500

Reserves = Demand deposits = 500

Maximum deposits = (Reserves - Excess reserves) * Maximum banking multiplier

= (500 - 0) * (1 / 25%)

= 2000