The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3. Table 12.3
Refer to Table 12.3.If the reserve requirement changed to 8 percent, then total loans in the economy would be equal to _____.

Question

The table given below records the amount of new deposits, the value of required reserves, and total amount loaned out by Banks 1, 2, and 3. Table 12.3
 Refer to Table 12.3.If the reserve requirement changed to 8 percent, then total loans in the economy would be equal to _____.

Quizplus · Accepted Answer

To find the total loans in the economy after a change in reserve requirement, we need to first find the total reserves that banks must hold with the new requirement.

With new deposits of $100,000, the required reserves with an 8% reserve requirement would be:
$100,000 x 0.08 = $8,000

So, banks would have $92,000 ($100,000 - $8,000) to loan out.

Bank 1 would be able to loan out:
$40,000 - $3,200 = $36,800

Bank 2 would be able to loan out:
$30,000 - $2,400 = $27,600

Bank 3 would be able to loan out:
$20,000 - $1,600 = $18,400

The total loans in the economy would be:
$36,800 + $27,600 + $18,400 = $82,800

Therefore, the correct answer is B) $115,000.

The Table Given Below Records the Amount of New Deposits