Table 25-3

-Refer to Table 25-3. Consider the following simplified balance sheet for a bank: If the required reserve ratio is 10 percent, the bank can make a maximum loan of

Question

Table 25-3
 
-Refer to Table 25-3. Consider the following simplified balance sheet for a bank: If the required reserve ratio is 10 percent, the bank can make a maximum loan of

Quizplus · Accepted Answer

The bank can make a maximum loan of $2,000 because with a 10% reserve ratio, it must keep 10% of its deposits as reserves. If the bank has $20,000 in deposits, it must keep $2,000 in reserves, allowing it to loan out the remaining $18,000. If it currently has $16,000 in loans, it can loan an additional $2,000.

Table 25-3 -Refer to Table 25-3. Consider the Following Simplified Balance Sheet