Assuming a reserve ratio of 5 percent, if a bank sells $200,000 in securities how much can the bank loan out?

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With a reserve ratio of 5 percent, the bank is required to hold 5% of its deposits as reserves. If the bank sells $200,000 in securities, its deposits (and reserves) do not change. Therefore, the bank can loan out the entire $200,000, as long as it maintains the required 5% reserve ratio ($200,000 x 0.05 = $10,000). This means the bank can loan out $190,000 ($200,000 - $10,000).

Assuming a Reserve Ratio of 5 Percent, If a Bank