If a bank receives a new checkable deposit of $10,000, and the required reserve ratio is 20 percent, then the bank can lend out:
A) $2,000.
B) $10,000.
C) $40,000.
D) $8,000.
E) $0.

Question

Quizplus · Accepted Answer

If the required reserve ratio is 20%, the bank is required to hold onto 20% of the new deposit. In this case, that would be $2,000. Therefore, the maximum amount the bank can lend out is $8,000.

If a Bank Receives a New Checkable Deposit of $10,000