CE 03-35

Answer CE 03-35 and CE 03-36 by referring to the following balance sheet of a banking system. Suppose the required reserve ratio is 20%.

Which of the following statements about the above banking system is correct?

A. The maximum banking multiplier is 4.

B. The maximum possible increase in loans will be the same as the maximum possible increase in deposits.

C. The actual reserve ratio is equal to the required reserve ratio.

D. The amount of reserves will decrease if all banks loan out their excess reserves.