Asked by
Jalen Watson
on Nov 11, 2024
Verified
If the required reserve ratio is 10 percent and a bank receives a new deposit for $100,000,then the:
A) bank must keep $5,000 in excess reserves.
B) bank's required reserves increase by $45,000.
C) bank's liabilities increase by $100,000.
D) bank can increase its loans by up to $50,000.
E) bank can increase its loans by up to $400,000.
Required Reserve Ratio
The fraction of deposits that banks are mandated by regulation to hold in reserve and not lend out.
Excess Reserves
The banks' reserves over and above the required minimum that they choose to hold rather than loan out.
- Explain the concept of reserve requirements and how it affects bank lending capabilities.
- Identify the role of banks in creating money through the lending process.
Verified Answer
JM
Learning Objectives
- Explain the concept of reserve requirements and how it affects bank lending capabilities.
- Identify the role of banks in creating money through the lending process.