A bank has reserves of $30,000 and deposits of $120,000. If the reserve ratio is 10%, then this bank can lend out a maximum of $12,000 in new loans.

Name: A bank has reserves of $30,000 and deposits of $120,000. If the reserve ratio is 10%, then this bank can lend out a maximum of $12,000 in new loans.
Brand: Quizplus
Rating: 4.8 (41 reviews)

Question

Quizplus · Accepted Answer

The bank can lend out $18,000 because it needs to keep only $12,000 (10% of $120,000) in reserves, leaving $18,000 available for new loans from its $30,000 reserves.

A Bank Has Reserves of $30,000 and Deposits of $120,000