If a bank has $200,000 of demand deposits, a desired reserve ratio of 20 percent, and it holds $80000 in reserves, then the maximum deposit outflow it can sustain without altering its balance sheet is ________.

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Quizplus · Accepted Answer

The maximum deposit outflow that the bank can sustain without altering its balance sheet is $50,000. This is because the bank has $80,000 in reserves, and it is required to hold 20% of its demand deposits in reserves. Therefore, the bank can afford to lose up to $50,000 in deposits before it falls below its required reserve ratio.

If a Bank Has $200,000 of Demand Deposits, a Desired