Suppose the Fed requires banks to hold 10% of their deposits as reserves.A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000.How much does this bank now have to lend out if it decides to hold only required reserves?
A)$29,000
B)$28,100
C)$19,100
D)$11,000

Question

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The bank has $20,000 of excess reserves. It sells a Treasury bill for $9,000, which reduces its reserves by $9,000. This leaves the bank with $11,000 of excess reserves. If the bank decides to hold only required reserves, it must lend out $11,000.

Suppose the Fed Requires Banks to Hold 10% of Their