Suppose a bank has $600,000 in deposits, a reserve ratio of 20 percent, and bank reserves of $240,000. This bank can make new loans in the amount of
A) $840,000.
B) $360,000.
C) $120,000.
D) $12,000.

Question

Quizplus · Accepted Answer

The bank must keep 20% of $600,000 in reserves, which is $120,000. Since it already has $240,000 in reserves, it has $120,000 more than required and can lend this amount out.

Suppose a Bank Has $600,000 in Deposits, a Reserve Ratio