Suppose a bank has $100,000 in deposits,a required reserve ratio of 20 percent,and total reserves of $20,000.Then this bank can make new loans in the amount of

Question

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With a required reserve ratio of 20%, the bank must keep $20,000 (20% of $100,000) in reserves. Since it already has $20,000 in reserves, it meets its requirement exactly and cannot extend any new loans without exceeding its reserve requirement.

Suppose a Bank Has $100,000 in Deposits,a Required Reserve Ratio