Answer:
$100,000
Explanation:
The total amount of loans the banking system can make = total reserves available / reserve requirement = $5,000 / 5% = $100,000
Banks have the ability to create money, since they can lend money to a client, and if that client leaves the money on the bank in a checking account, the bank can lend it again, and the circle goes on and on. This creation of money results from the money multiplier. Money multiplier = 1 / reserve requirement = 1 / 5% = 20
