Table 13-1

-In Table 13-1,suppose that $20,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

Question

Table 13-1
 
-In Table 13-1,suppose that $20,000 in new deposits is received by the bank.If there were no other changes in the balance sheet,then the bank would be in a position to make new loans in the amount of

Quizplus · Accepted Answer

Looking at the balance sheet, we can see that the total deposits are currently $100,000 and the reserves are $10,000. The required reserves ratio is 10%, which means that the bank is required to hold onto 10% of its deposits in reserves.

If the bank receives $20,000 in new deposits, then its total deposits will increase to $120,000. The required reserves will correspondingly increase to $12,000 (10% of $120,000).

This means that the excess reserves (reserves above the required reserves) will increase by $8,000 ($20,000 - $12,000).

The maximum amount of new loans the bank can make is equal to its excess reserves, which is $8,000.

Therefore, the answer is C) $21,000.

Table 13-1 -In Table 13-1,suppose That $20,000 in New Deposits Is Received