Suppose a bank has $600,000 in deposits,a required reserve ratio of 5 percent,and bank reserves of $90,000.Then the bank can make new loans in the amount of

Question

Quizplus · Accepted Answer

The bank can make new loans up to the amount of excess reserves, which is calculated as total reserves minus required reserves. Total reserves are given as $90,000 and required reserves are 5% of deposits ($600,000), which is $30,000. Therefore, excess reserves are $60,000 ($90,000 - $30,000). The bank can make new loans up to the amount of excess reserves, which is $60,000. Thus, the correct choice is C ($60,000).

Suppose a Bank Has $600,000 in Deposits,a Required Reserve Ratio