$$\begin{array} { | l | c | }
\hline \text { Reserves } & \$ 100 \
\hline \text { Checkable Deposits } & 1,000 \
\hline \text { Loans (to customers) } & 300 \
\hline \text { Property } & 400 \
\hline \text { Securities (owned) } & 300 \
\hline \text { Stock Shares } & 100 \
\hline
\end{array}$$ Refer to the accompanying table of information for the Moolah Bank. If Moolah Bank is legally "loaned up," the reserve requirement must be
A) 10 percent.
B) 15 percent.
C) 20 percent.
D) 25 percent.

Question

$$\begin{array} { | l | c | } 
\hline \text { Reserves } & \$ 100 \
\hline \text { Checkable Deposits } & 1,000 \
\hline \text { Loans (to customers) } & 300 \
\hline \text { Property } & 400 \
\hline \text { Securities (owned) } & 300 \
\hline \text { Stock Shares } & 100 \
\hline
\end{array}$$ Refer to the accompanying table of information for the Moolah Bank. If Moolah Bank is legally "loaned up," the reserve requirement must be
A) 10 percent.
B) 15 percent.
C) 20 percent.
D) 25 percent.

Quizplus · Accepted Answer

The reserve requirement is the percentage of checkable deposits that a bank must hold in reserve, either in its vault or on deposit at the Federal Reserve. In order for a bank to be "loaned up," it means that it has loaned out all of its excess reserves (the amount of reserves above required reserves). The required reserves can be calculated by multiplying the checkable deposits by the reserve requirement ratio.

In this case, the checkable deposits are \$1,000, so if the reserve requirement is 10 percent, the required reserves would be \$100 (10% of \$1,000). Since the bank has \$100 in reserves, this means that it has no excess reserves and is loaned up. Therefore, the correct answer is A) 10 percent.

Refer to the Accompanying Table of Information for the Moolah