Assume a simplified banking system in which all banks are subject to a uniform reserve requirement of 20 percent and checkable deposits are the only from of money. A bank that received a new checkable deposit of $10,000 would be able to extend new loans up to a maximum of:
A) $2,000.
B) $8,000.
C) $9,000.
D) $10,000.

Question

Quizplus · Accepted Answer

With a reserve requirement of 20%, the bank must keep 20% of the deposit ($2,000) in reserve and can loan out the remaining 80%, which is $8,000.

Assume a Simplified Banking System in Which All Banks Are