Suppose a bank has $200,000 in deposits,a required reserve ratio of 25 percent,and bank reserves of $100,000.Then this bank can make new loans in the amount of

Question

Quizplus · Accepted Answer

The required reserve ratio of 25 percent means that the bank must hold onto 25 percent of its deposits as reserves. In this case, 25 percent of $200,000 is $50,000. Since the bank already has $100,000 in reserves, it can make new loans in the amount of its excess reserves, which is $100,000 - $50,000 = $50,000. Therefore, the correct answer is B) $50,000.

Suppose a Bank Has $200,000 in Deposits,a Required Reserve Ratio