Consider the following T-account for a bank:

If the bank's reserve ratio is 20% and the bank is holding no excess reserves, the bank at this point will not make any more loans.

Question

Consider the following T-account for a bank:
  
If the bank's reserve ratio is 20% and the bank is holding no excess reserves, the bank at this point will not make any more loans.

Quizplus · Accepted Answer

If the bank is holding no excess reserves, its required reserve balance is equal to the required reserve ratio, which in this case is 20% of its deposits. If the bank makes any more loans, it would decrease its required reserve balance below the required reserve ratio, which would violate banking regulations. Therefore, the bank at this point cannot make any more loans.

Consider the Following T-Account for a Bank