If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is
A)$30,000.
B)$25,000.
C)$20,000.
D)$10,000.

Question

Quizplus · Accepted Answer

The bank is required to hold $20,000 in reserves (20% of $100,000). With $40,000 in reserves, it can afford a $20,000 outflow and still meet the reserve requirement, leaving $20,000 in reserves. Thus, the maximum outflow is $40,000 - $20,000 = $20,000.

If a Bank Has $100,000 of Checkable Deposits,a Required Reserve