Suppose a bank has a 20 percent reserve ratio, $2500 in deposits, and it loans out all it can, given the reserve ratio. Which of the following describes the bank's assets?
A)It has $50 in reserves and $$2500 in loans.
B)It has $50 in reserves and $2450 in loans.
C)It has $500 in reserves and $2000 in loans.
D)It has $500 in reserves and $2500 in loans.

Question

Quizplus · Accepted Answer

The bank must keep 20% of $2500 in reserves, which is $500. The remaining $2000 can be loaned out.

Suppose a Bank Has a 20 Percent Reserve Ratio, $2500 $$2500 in Loans