Consider the following T-account for a bank.
If the desired reserve ratio is 20 percent and the bank is holding no excess reserves,the bank at this point can make no more loans.

Question

Consider the following T-account for a bank.
  If the desired reserve ratio is 20 percent and the bank is holding no excess reserves,the bank at this point can make no more loans.

Quizplus · Accepted Answer

If the bank is holding no excess reserves and the desired reserve ratio is 20 percent, then the bank has already lent out the maximum amount of money it can based on its reserves. Therefore, it can make no more loans at this point.

Consider the Following T-Account for a Bank