If the reserve ratio is 7 percent and a bank receives a new deposit of $300,by how much can the bank increase its new loans?
A)by $21
B)by $279
C)by $300
D)by $4 285

Question

Quizplus · Accepted Answer

The reserve ratio is the percentage of deposits that a bank is required to keep in reserve and cannot be lent out. In this case, the reserve ratio is 7%, so the bank must keep 7% of the $300 deposit as reserves, which is $21. The remaining $279 can be lent out as new loans. Therefore, the bank can increase its new loans by $279.

If the Reserve Ratio Is 7 Percent and a Bank