Suppose banks desire to hold no excess reserves.If the reserve requirement is 15 percent and if a bank receives a new deposit of $10,then this bank
A) must increase its required reserves by $10.
B) will initially see its total reserves increase by $15.
C) will be able to make new loans up to a maximum of $8.50.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The bank must hold 15% of the $10 deposit as required reserves, which is $1.50. Therefore, it can loan out the remaining $8.50.

Suppose Banks Desire to Hold No Excess Reserves