Suppose a bank gets a new deposit of $100 cash and it has a 20% required reserve ratio. If the bank lends the maximum amount of money allowe

Suppose a bank gets a new deposit of $100 cash and it has a 20% required reserve ratio. If the bank lends the maximum amount of money allowed, then the checkable deposits (including the original deposit) increase by:

A. $1,000.
B. $20.
C. $500.
D. $100.

0 thoughts on “Suppose a bank gets a new deposit of $100 cash and it has a 20% required reserve ratio. If the bank lends the maximum amount of money allowe”

  1. Answer:

    check able deposits = $500

    correct option is C. $500

    Explanation:

    given data

    cash deposit = $100

    reserve ratio = 20%

    to find out

    check able deposits

    solution

    we will apply here check able deposits formula that is express as

    check able deposits = cash deposit + ( deposit cash – ( deposit cash × reserved ratio ) × [tex]\frac{1}{reserve ratio}[/tex] )     ………………………1

    put here value we get

    check able deposits = $100 + ( $100 – ( $100 × 20% ) × [tex]\frac{1}{0.2}[/tex] )

    check able deposits = $500

    correct option is C. $500

    Reply

Leave a Comment

+ twenty = twenty one