The federal reserve is the central bank of the United States of America. It is considered as an independent bank because it does not need permission from the President to make transactions. Moreover, it does not benefit from the Congress' budget. The federal reserve only gives emergency loans to commercial banks during times of crisis to prevent bankruptcy.
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The maximum amount of new loans the bank can extend is $800,000.
<h3>What is the maximum amount of new loans the bank can extend?</h3>
The reserve ratio is the amount of deposits that must be kept as reserves with the central bank. The money that is not kept as reserves can be used to create loans.
Maximum loan amount = deposit - (reserve ratio x deposits)
1,000,000 - (0.2 x 1,000,000) = $800,000
To learn more about required reserves, please check: brainly.com/question/26960248
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