When $1 million is deposited at a bank, the desired reserve ratio is 20 percent, and the bank chooses not to make any loans but to hold excess reserves instead, then, in the bank's final balance sheet, ________.

Question

Quizplus · Accepted Answer

When $1 million is deposited at a bank, the bank's assets increase by $1 million because the deposit is an asset to the bank. The desired reserve ratio and the bank's decision to hold excess reserves instead of making loans do not change the fact that the initial deposit increases the bank's assets by the deposited amount.

When $1 Million Is Deposited at a Bank, the Desired