Question

Suppose ​$50 comma 000 is deposited at a bank. The required reserve ratio is 20 ​percent, and the bank chooses not to hold any excess reserves but makes loans instead. What are the​ bank's total​ reserves?

Answer 1

Answer:

$10,000

Explanation:

Provided amount deposited to bank = $50,000

Reserve ratio is 20%

And provided the company do not have any amount more than the required reserve, therefore balance in reserve = $50,000 $\times$ 20% = $10,000

Further remaining $50,000 - $10,000 = $40,000 will be advanced as loan, and will not form part of reserves.

Therefore, total reserve's of bank = $10,000