Use the balance sheet for the following questions.
Table 29-2

-Refer to Table 29-2.If someone deposits $400 into the First Bank of Mason City,
A)the bank will be able to make additional loans totaling $320.
B)excess reserves initially increase by $320.
C)required reserves initially increase by $80.
D)All of the above are correct.

Question

Use the balance sheet for the following questions.
Table 29-2
 
-Refer to Table 29-2.If someone deposits $400 into the First Bank of Mason City,
A)the bank will be able to make additional loans totaling $320. 
B)excess reserves initially increase by $320. 
C)required reserves initially increase by $80. 
D)All of the above are correct.

Quizplus · Accepted Answer

When $400 is deposited, required reserves increase by $80 (assuming a reserve ratio of 20%), leaving $320 as excess reserves, which can be loaned out. Thus, all statements are correct.

Use the Balance Sheet for the Following Questions