Suppose a bank has a 10 percent reserve requirement,$5,000 in deposits,and has loaned out all it can given the reserve requirement.
A) It has $50 in reserves and $4,950 in loans.
B) It has $500 in reserves and $4,500 in loans.
C) It has $555 in reserves and $4,445 in loans.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

The reserve requirement is 10% of $5,000, which is $500. Therefore, the bank must hold $500 in reserves and can loan out the remaining $4,500.

Suppose a Bank Has a 10 Percent Reserve Requirement,$5,000 in Deposits,and