Consider the following T-account for a bank

If the required reserve ratio is 20 percent and the bank is holding no excess reserves,the bank at this point can make no more loans.

Question

Consider the following T-account for a bank
  
If the required reserve ratio is 20 percent and the bank is holding no excess reserves,the bank at this point can make no more loans.

Quizplus · Accepted Answer

If the bank is holding no excess reserves and the required reserve ratio is 20 percent, it means that the bank must keep 20 percent of its deposits as reserves and can only lend out the remaining 80 percent. If the T-account shows that the bank has already lent out all of its deposits (i.e. the liability side of the T-account shows no remaining deposits), then the bank cannot make any more loans without violating the required reserve ratio. Therefore, the answer is A) True.

Consider the Following T-Account for a Bank