A bank has $10,000 in deposits and $8,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is
A)2 percent.
B)12.5 percent.
C)20 percent.
D)80 percent.

Question

Quizplus · Accepted Answer

The reserve requirement is the percentage of deposits that a bank must hold as reserves. If the bank has $10,000 in deposits and has loaned out $8,000, it must hold $2,000 in reserves. The reserve requirement is therefore $2,000/$10,000 = 20 percent.

A Bank Has $10,000 in Deposits and $8,000 in Loans