A bank receives a new cash deposit of $1,000. The required reserve ratio is 20%, there is no cash drain, and banks lend all excess reserves. Maximum total deposits are:

解說

Maximum total deposits = new reserves / rrr = 1,000 / 0.20 = $5,000, including the original deposit. Required reserves on the first deposit are $200, so the first loan is $800, not the whole $1,000. This 20% ratio is a classroom example, not Hong Kong's statutory HKD ratio, which is zero.