A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?

Name: A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans?
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Question

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The bank must keep 20% of the $100,000 deposit as reserves, which is $20,000. The remaining $80,000 can be loaned out.

A Bank Has No Excess Reserves