Assume that Paris First National Bank is a thriving bank with deposits of $20 million. If the minimum liquidity requirement is 20 per cent and the bank is fully loaned out, the bank will keep what amount of required reserves?

Question

Quizplus · Accepted Answer

The minimum liquidity requirement is 20%, which means the bank must keep 20% of its deposits as required reserves. Therefore, Paris First National Bank must keep $4 million (20% of $20 million) in required reserves.

Assume That Paris First National Bank Is a Thriving Bank