Exhibit 19-1 Balance sheet of First Iliad State Bank In Exhibit 19-1, if the required reserve ratio is raised to 18 percent, then First Iliad State will:

Question

Exhibit 19-1  Balance sheet of First Iliad State Bank  In Exhibit 19-1, if the required reserve ratio is raised to 18 percent, then First Iliad State will:

Quizplus · Accepted Answer

The required reserve ratio is the percentage of deposits that banks are required to hold in reserve. If it is raised from 10 percent to 18 percent, then First Iliad State Bank will have to increase its required reserves from $200,000 to $360,000. This means they will have to convert loans worth $160,000 ($360,000 - $200,000) to required reserves. Therefore, the correct answer is B, they will have to convert loans worth $200,000 to required reserves. They will not be able to make additional loans as their reserves will decrease.

Exhibit 19-1 Balance Sheet of First Iliad State Bank in Exhibit