$\begin{array}{|l|l|}
\hline {\text { Assets }} &{\text { Liabilities }} \
\hline \text { Reserves } & \
\$ 400 & \text { Deposits } \
\text { Loans } & \$ 1,200 \
\$ 800 & \
\text { Total } & \text { Total } \
\$ 1,200 & \$ 1,200\
\hline
\end{array}$
-In the balance sheet above,the entries are in millions of dollars for the FBN Bank.If the desired reserve ratio on deposits is 10 percent,FBN Bank can loan an additional
A) $280 million.
B) $200 million.
C) $100 million.
D) $0.

Question

$\begin{array}{|l|l|}
\hline {\text { Assets }} &{\text { Liabilities }} \
\hline \text { Reserves } & \
\$ 400 & \text { Deposits } \
\text { Loans } & \$ 1,200 \
\$ 800 & \
\text { Total } & \text { Total } \
\$ 1,200 & \$ 1,200\
\hline 
\end{array}$ 
-In the balance sheet above,the entries are in millions of dollars for the FBN Bank.If the desired reserve ratio on deposits is 10 percent,FBN Bank can loan an additional
A) $280 million.
B) $200 million.
C) $100 million.
D) $0.

Quizplus · Accepted Answer

The desired reserve ratio is 10%, which means that for every $100 of deposits, the bank must hold $10 in reserves. The bank currently has $1,200 million in deposits and $400 million in reserves, which means that it is holding 33.3% of its deposits in reserves. To reach the desired reserve ratio of 10%, the bank must increase its reserves by $800 million. This will allow it to loan an additional $800 million, which is equal to choice A.

-In the Balance Sheet Above,the Entries Are in Millions of \text