Suppose a chartered bank has $6,000 in chequable deposits and the desired reserve ratio is 0.2.What is the maximum amount of money this single bank can lend?

Question

Quizplus · Accepted Answer

The maximum amount of money that the single bank can lend is calculated by multiplying the chequable deposits by the reserve ratio multiplier. The reserve ratio multiplier is the inverse of the reserve ratio (1/0.2 = 5). Therefore, the maximum amount of money the bank can lend is $6,000 x 5 = $30,000. However, since the question is asking for the maximum amount of money the bank can lend, we need to subtract the required reserves from the total lendable funds. The required reserves are $6,000 x 0.2 = $1,200. Therefore, the maximum amount of money the bank can lend is $30,000 - $1,200 = $28,800.

Suppose a Chartered Bank Has $6,000 in Chequable Deposits and the Desired