Table 14-3

-Refer to Table 14-3.Consider the above simplified balance sheet for a bank.If the required reserve ratio is 10 percent,the bank can make a maximum loan of
A)$2,000.
B)$5,000.
C)$6,300.
D)$45,000.

Question

Table 14-3
 
-Refer to Table 14-3.Consider the above simplified balance sheet for a bank.If the required reserve ratio is 10 percent,the bank can make a maximum loan of
A)$2,000. 
B)$5,000. 
C)$6,300. 
D)$45,000.

Quizplus · Accepted Answer

The bank must keep 10% of its deposits as reserves. If the bank's total deposits are $20,000, it must keep $2,000 as reserves. Therefore, it can loan out the remaining $18,000. If the bank already has $16,000 in loans, it can make an additional loan of $2,000.

Table 14-3 -Refer to Table 14-3.Consider the Above Simplified Balance Sheet for Simplified