Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?

Name: Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 20 percent. How many deposits can Bank A create?
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Question

Quizplus · Accepted Answer

Bank A already holds the exact amount of reserves required for its current deposits at a 20% reserve ratio ($200 is 20% of $1000), meaning it has no excess reserves to support additional deposits.

Suppose Bank a Holds $200 of Reserves, Has Deposits of $1000