Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r }
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information and assume that Moolah bank is "loaned up." If it receives a $100 deposit of currency,it could safely expand its loans by:
A) $100.
B) $90.
C) $900.
D) $1,000.

Question

Answer the question on the basis of the following information for the Moolah Bank. $\begin{array} { l r } 
\text { Reserves } & \$ 100 \
\text { Checkable Deposits } & 1,000 \
\text { Loans (to customers) } & 300 \
\text { Property } & 400 \
\text { Securities (owned) } & 300 \
\text { Stock Shares } & 100
\end{array}$ Refer to the information and assume that Moolah bank is "loaned up." If it receives a $100 deposit of currency,it could safely expand its loans by:
A) $100.
B) $90.
C) $900.
D) $1,000.

Quizplus · Accepted Answer

Based on the information provided, if Moolah bank is "loaned up," it means they have already lent out all their available funds. Therefore, they cannot expand their loans by the full amount of the $100 deposit. Instead, they need to maintain a certain amount of reserves (i.e. cash or deposits with the central bank) to meet regulatory requirements and customer demands for withdrawals. The reserve requirement is not specified in the information given, but assuming it is 10%, Moolah bank could safely expand its loans by $90 (i.e. 90% of the $100 deposit).

Answer the Question on the Basis of the Following Information