The amount that a chartered bank can lend is determined by its:
A)desired reserves.
B)excess reserves.
C)outstanding loans.
D)outstanding demand deposits.

Question

Quizplus · Accepted Answer

The amount that a chartered bank can lend is determined by its excess reserves, which is the amount of funds that the bank holds above its required reserve ratio. This excess can be lent out to borrowers. Desired reserves, outstanding loans, and outstanding demand deposits also impact a bank's lending capacity, but they do not directly determine the maximum amount that can be lent out.

The Amount That a Chartered Bank Can Lend Is Determined