-Refer to Table 13.1.If XYZ Bank has a required reserve ratio of 10 percent and loan proceeds are not redeposited,it can legally increase its loans by

Question

Quizplus · Accepted Answer

If the required reserve ratio is 10 percent and loan proceeds are not redeposited, the bank can legally increase its loans by $60,000. This is because the bank must hold 10 percent of its deposits in reserve, so if it has $600,000 in deposits, it must hold $60,000 in reserve. This means that it can lend out the remaining $540,000.