If a bank has $400,000 of checkable deposits, and it holds $80,000 in required reserves, then...
If a bank has $400,000 of checkable deposits, and it holds $80,000 in required reserves, then (A) what would be the required reserve ratio? (B) What is the maximum loan amount could this bank make?
Homework Answers
Answer
(A) what would be the required reserve ratio?
Required reserve ratio =required reserves /deposits
=80000/400000
=0.2
=20%
(B) What is the maximum loan amount could this bank make?
Maximum loan amount =excess reserves = deposits - required reserves
=40000-80000
=320000
the bank can make loans maximum of $320000
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