Suppose Bank A has $1000 in deposits and $100 in reserves. If the desired reserve ratio is 8 percent, how much can this bank lend?
A) $800
B) $720
C) $20
D) $80

Question

Quizplus · Accepted Answer

The desired reserve ratio is 8%, so the bank needs to keep $80 in reserves (8% of $1000). Since it has $100 in reserves, it can lend out the excess reserves, which is $100 - $80 = $20.

Suppose Bank a Has $1000 in Deposits and $100 in Reserves