Table 29-3.
The First Bank of Johnson City

-Refer to Table 29-3.Starting from the situation as depicted by the T-account,if someone deposits $500 into the First Bank of Johnson City,and if the bank makes new loans so as to keep its reserve ratio unchanged,then the amount of new loans that it makes will be
A) $320.
B) $400.
C) $680.
D) $750.

Question

Table 29-3.
The First Bank of Johnson City
 
-Refer to Table 29-3.Starting from the situation as depicted by the T-account,if someone deposits $500 into the First Bank of Johnson City,and if the bank makes new loans so as to keep its reserve ratio unchanged,then the amount of new loans that it makes will be
A) $320. 
B) $400. 
C) $680. 
D) $750.

Quizplus · Accepted Answer

The bank will keep its reserve ratio unchanged, meaning it will hold a portion of the deposit as reserves and loan out the rest. If the reserve ratio is 20%, the bank will hold $100 (20% of $500) and loan out $400.

Table 29-3. The First Bank of Johnson City