If the reserve ratio is 5 percent and a bank receives a new deposit of $1,000, by how much can the bank increase its new loans?

Name: If the reserve ratio is 5 percent and a bank receives a new deposit of $1,000, by how much can the bank increase its new loans?
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Question

Quizplus · Accepted Answer

With a reserve ratio of 5 percent, the bank must keep 5% of the deposit as reserves, which is $50 in this case ($1,000 * 0.05). Therefore, it can lend out the remaining $950 ($1,000 - $50).

If the Reserve Ratio Is 5 Percent and a Bank