A bank receives new deposits equal to $200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?
What will be an ideal response?
The bank can make new loans equal to the amount of its excess reserves. The bank's desired reserves equal ($200,000 ) × (0.10 ) = $20,000, leaving the bank with excess reserves of $180,000. As a result, the bank can make $180,000 in new loans.
You might also like to view...
Customer discrimination against black investment advisers ________ the salaries of black investment advisors and ________ the number of black investment advisers
A) decreases; decreases B) decreases; does not change C) does not change; decreases D) does not change; does not change
When a financial intermediary purchases a nontraded claim of either a business or an individual, its main concern is with
A) interest rate risk. B) credit risk. C) reinvestment rate risk. D) None of the above.