Suppose a bank has $200,000 in deposits and $190,000 in loans.It has loaned out all it can.It has a reserve ratio of

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Reserve ratio is the ratio of reserves to deposits. If the bank has $190,000 in loans and the reserve ratio is 5%, then the bank must hold back 5% of $200,000 in deposits, which is $10,000. Therefore, the bank has $10,000 in reserves, and the remaining $190,000 in loans is the maximum amount that can be loaned out. Any lower reserve ratio would mean that the bank has already lent out more than is allowed. Thus, the reserve ratio of 5% is the best choice.

Suppose a Bank Has $200,000 in Deposits and $190,000 in Loans.It