Suppose a bank has a 10 percent reserve ratio, $2000 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?
A) It has $20 in reserves and $1800 in loans.
B) It has $20 in reserves and $1980 in loans.
C) It has $200 in reserves and $1800 in loans.
D) It has $200 in reserves and $2000 in loans.

Question

Quizplus · Accepted Answer

With a 10 percent reserve ratio, the bank must keep 10% of $2000 in deposits as reserves, which is $200. The rest, $1800, can be loaned out.

Suppose a Bank Has a 10 Percent Reserve Ratio, $2000