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11 October, 03:44

If the required reserve ratio is 0.08, a bank can lend out:

A) 8 percent of its deposits.

B) 8 percent of its reserves

C) 92 percent of its deposits.

D) 92 percent of its reserves.

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Answers (1)
  1. 11 October, 05:11
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    C) 92 percent of its deposits.

    Explanation:

    Since, the reserve ratio represents the portion of deposit that a commercial bank must hold onto, rather than lend out or invest.

    i. e. if reserve ratio = a%,

    Then the percentage of amount that bank can land out = (100-a) %,

    Here,

    Reserve ratio = 0.08 = 8%,

    Thus, the percentage of amount that bank can land out = (100-8) % = 92%.

    i. e. bank can land 92 percent of its deposits.
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