Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A?
A) zero, because Bank A has no unplanned reserves
B) $200
C) $50
D) $850

Question

Quizplus · Accepted Answer

Bank A needs to hold 15% of $1000 in reserves, which is $150. Since it has $200 in reserves, it has $50 in excess reserves that can be used to create loans.

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