Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 per cent. How many loans can Bank A create at Bank A?

Name: Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 per cent. How many loans can Bank A create at Bank A?
Brand: Quizplus
Rating: 4.8 (51 reviews)

Question

Quizplus · Accepted Answer

Bank A's required reserves are 15% of $1000, which is $150. Since it holds $200 in reserves, it has $50 in excess reserves, which can be used to create loans.

Suppose Bank a Holds $200 of Reserves, Has Deposits of $1000