Suppose a transaction changes a bank's balance sheet as indicated in the following T-account,and the required reserve ratio is 10 percent.
$\begin{array}{|c|c|}
\hline \text { Assets } & \text { Liabilities } \
\hline \text { Reserves }+\$ 2,000 & \text { Deposits }+\$ 2,000 \
\hline
\end{array}$
As a result of the transaction,the bank can make a maximum loan of

Question

Quizplus · Accepted Answer

Since the required reserve ratio is 10%, the bank must hold 10% of its deposits as reserves. In this case, the bank has deposits of $2,000, so its required reserves are $200. The bank currently has reserves of $2,000, so it has excess reserves of $1,800 ($2,000 - $200). The maximum loan the bank can make is equal to its excess reserves, so the answer is $1,800.

Suppose a Transaction Changes a Bank's Balance Sheet as Indicated