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20 December, 22:48

If a bank receives a new transaction deposit of $100,000 and the reserve ratio is 20 percent, then the bank could expand its loans by as much as $80,000. $400,000. $20,000. $100,000.

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Answers (2)
  1. 20 December, 23:25
    0
    Answer: $80,000

    Explanation: The reserve ratio is the percentage of deposits a bank is to leave in its reserve account. From the question above, the total deposits is $100,000 and the reserve ratio is 20%. The reserve amount is $20,000 (100,000*0.2) while the bank can loan out $80,000 balance of the $100,000 deposit.
  2. 21 December, 01:51
    0
    B. $400,000

    Explanation:

    Recall that,

    Max change in loans = the initial change in excess reserve * the money multiplier

    Where

    Initial change in excess reserve = (1 - 2%) * 100 = 80,000

    Money multiplier = 1/2% = 5

    Thus

    Change in max loans = 80,000 * 5

    = $400,000
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