Table 21-3.

-Refer to Table 21-3.If $1,000 is deposited into the First Bank of Fairfield,and the bank takes no other actions,its
A) reserves will increase by $200.
B) liabilities will decrease by $1,000.
C) assets will increase by $1,000.
D) reserves will increase by $800.

Question

Table 21-3.
 
-Refer to Table 21-3.If $1,000 is deposited into the First Bank of Fairfield,and the bank takes no other actions,its
A) reserves will increase by $200. 
B) liabilities will decrease by $1,000. 
C) assets will increase by $1,000. 
D) reserves will increase by $800.

Quizplus · Accepted Answer

According to the table, the required reserve ratio is 20%. This means that for every $1,000 deposit, the bank is required to hold $200 in reserves. Therefore, the bank will increase its assets by the full $1,000 deposit since it can lend out the remaining $800.

Table 21-3. -Refer to Table 21-3.If $1,000 Is Deposited into the First