Imagine that Odyssey National is a brand new bank, and that its required reserve ratio is 10 percent. If it accepts a $1,000 deposit, then its loan balance can increase by a maximum of:
A) $0.
B) $90.
C) $100.
D) $900.
E) $910.

Question

Quizplus · Accepted Answer

The required reserve ratio is 10%, meaning the bank must keep $100 (10% of $1,000) in reserves. Therefore, it can loan out the remaining $900.

Imagine That Odyssey National Is a Brand New Bank, and That