If the reserve requirement is 10 percent and banks desire to hold no excess reserves, when a bank receives a new deposit of $100,
A)it must increase its required reserves by $10.
B)its total reserves initially increase by $10.
C)it will be able to make new loans up to a maximum of $10.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The reserve requirement is 10 percent, so the bank must hold $10 of the $100 deposit as required reserves.

If the Reserve Requirement Is 10 Percent and Banks Desire