The banking system has $5,000 in reserve, $45,000 in loans, and $50,000 in deposits. Currently the reserve requirement is 10%.  If the Fed lowers reserve requirement to 5%, the banking system converts 75% excess reserves to loans, but borrowers return only 60% of these funds to the banking system as deposits. What is the maximum amount of loans the banking system could make?

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A: Required reserve = 14% Excess reserves= $1000 Change in money = money multiplier* excess reserves