Consider the following T-account for a bank:
If the required reserve ratio is 20 percent and the bank is holding no excess reserves,the bank at this point can make no more loans.

Question

Consider the following T-account for a bank:
  If the required reserve ratio is 20 percent and the bank is holding no excess reserves,the bank at this point can make no more loans.

Quizplus · Accepted Answer

This is because the required reserve ratio of 20% means that the bank must hold on to 20% of its deposits as reserves. If the bank is already holding no excess reserves, then it has already met the required reserve ratio and cannot make any more loans without risking not having enough reserves on hand.

Consider the Following T-Account for a Bank