Answer:
The correct answer is $30 billions.
Explanation:
The checkable deposits are given as $140 billions.
The total reserves are $51 billions.
The required reserve rate is 30%.
The required reserves will be
=30% of $140 billions
=[tex]0.3 \times 140[/tex]
=$42 billions
The excess reserves will be
=total reserves-required reserves
=$51-$42
=$9 billions
Maximum expansion by lending will be
=[tex]\frac{excess reserves}{required \ reserve\ rate}[/tex]
=[tex]\frac{9}{0.3}[/tex]
=$30 billions
So, the money supply can be expanded by a maximum amount of $30 billions.
