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

According to the T-account, the bank's total deposits are $100,000. If the required reserve ratio is 20%, the bank must hold $20,000 in reserve and can only lend out the remaining $80,000. However, in this case, the bank is already holding $20,000 in reserve, leaving no excess reserves to lend out. Therefore, the bank cannot make any more loans.

Consider the Following T-Account for a Bank