If a bank has $10 million of deposits,a required reserve ratio of 10 percent,and $2 million in reserves,then it does not have enough reserves to support a deposit outflow of

Question

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The bank needs to maintain $1 million in reserves (10% of $10 million). With $2 million in reserves, it can support a $1 million outflow. A $1.2 million outflow would leave it with only $0.8 million in reserves, which is below the required $1 million.

If a Bank Has $10 Million of Deposits,a Required Reserve