If the reserve ratio is 10 percent and a bank receives a new deposit of $20, which of the following happens to this bank's reserves or deposits?
A)Required reserves must increase by $2.
B)Total reserves will increase by $2.
C)New loans can be made up to a maximum of $2.
D)Total reserves increase by $200.

Question

Quizplus · Accepted Answer

When a bank receives a new deposit of $20 and the reserve ratio is 10 percent, the required reserves must increase by 10% of $20, which is $2.

If the Reserve Ratio Is 10 Percent and a Bank