Given a desired reserve ratio of 20 percent,a commercial bank which has received a new deposit of $100 can make additional loans of

Question

Quizplus · Accepted Answer

The reserve ratio is the percentage of deposits that a bank is required to keep as reserves and cannot lend out. In this case, the desired reserve ratio is 20%, which means that the bank must keep 20% of the $100 deposit as reserves, or $20.

This leaves the bank with $80 that it can lend out. Therefore, the bank can make additional loans of $80. The correct answer is thus choice C) $80.

Given a Desired Reserve Ratio of 20 Percent,a Commercial Bank