-The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The required reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, what volume of loans will be made by MegaBank if the bank wants more profit and holds no excess reserves?
A) $15.00
B) $33.00
C) $48.50
D) $50.00

Question

-The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The required reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, what volume of loans will be made by MegaBank if the bank wants more profit and holds no excess reserves?
A) $15.00 
B) $33.00 
C) $48.50 
D) $50.00

Quizplus · Accepted Answer

When Barney deposits $50 into his checking account, the bank's reserves increase by $50. With a required reserve ratio of 3%, the bank must keep $1.50 (3% of $50) as required reserves. The rest, $48.50, can be loaned out if the bank decides to hold no excess reserves. This maximizes the bank's profit potential from the new deposit.

-The Above Table Gives the Initial Balance Sheet for Mega