If a bank has total reserves of $175,000 and $1,000,000 in deposits, how much money can it lend if the required reserve ratio is 5%

Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter14: Money And Banking
Section: Chapter Questions
Problem 8AA
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If a bank has total reserves of $175,000 and $1,000,000 in deposits, how much money can it lend if the required reserve ratio is 5%

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Total reserves is the sum of excess reserves and required reserves. Required reserves are the reserves that banks are needed to hold as a minimum requirement. Excess reserves are the reserves banks hold over the legal requirement.

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