Question 1
As commercial banks keep fewer excess reserves, money creation
◦ increases.
◦ decreases.
◦ remains the same, as long as banks hold no excess reserves.
◦ could either increase or decrease.
Question 2
Refer to the information provided in Scenario 25.2 below to answer the question(s) that follow.
SCENARIO 25.2: The following table shows the changes in deposits, reserves, and loans of 4 banks as a result of a $100,000 initial deposit in Bank No. 1. Assume all banks are loaned up.

Refer to Scenario 25.2. What is the required reserve ratio?
◦ 4%
◦ 5%
◦ 8%
◦ 10%