Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system.
Table 13.1-XYZ Bank balance sheet
-Refer to Table 13.1.If XYZ Bank has a required reserve ratio of 20 percent,it can legally increase its loans by:
A) $10,000.
B) $20,000.
C) $40,000.
D) $50,000.

Question

Use the following balance sheet for XYZ Bank,which is one of many banks in a banking system.
Table 13.1-XYZ Bank balance sheet 
-Refer to Table 13.1.If XYZ Bank has a required reserve ratio of 20 percent,it can legally increase its loans by:
A) $10,000. 
B) $20,000. 
C) $40,000. 
D) $50,000.

Quizplus · Accepted Answer

With a required reserve ratio of 20%, the bank can lend out 80% of any new deposits it receives. Without the specific details from Table 13.1, we can deduce that if the bank can increase its loans by $10,000, it means this amount represents the 80% it can lend out, fitting the scenario of a 20% reserve requirement.

Use the Following Balance Sheet for XYZ Bank,which Is One