Imagine that Roland goes to his bank and deposits $10,000 in cash into his savings account. The bank, wanting to use those funds to generate revenue for itself, will look to make a loan with this cash. An important determinant of how much of that $10,000 the bank can lend is the

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The required reserve ratio is a regulation that sets the minimum fraction of customer deposits that each bank must keep on hand as reserves, rather than lending out. This directly influences how much of the $10,000 the bank can lend out.

Imagine That Roland Goes to His Bank and Deposits $10,000