Suppose all banks are subject to a uniform reserve requirement of 20 percent and that the Gamblers Last Chance Bank of Las Vegas has zero excess reserves. If a new customer deposits $10,000, the bank can now extend new loans up to a maximum of:

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The bank is subject to a reserve requirement of 20%, which means it must hold 20% of the new deposit ($10,000) as reserves and can lend out the remaining 80%. Therefore, the bank can lend up to $8,000 ($10,000 x 0.80) in new loans.

Suppose All Banks Are Subject to a Uniform Reserve Requirement