Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. What is the level of loans?
A)$270 billion
B)$5,400 billion
C)$6,000 billion
D)$5,100 billion

Question

Quizplus · Accepted Answer

The level of loans is equal to the total reserves minus excess reserves divided by the reserve requirement. In this case, the level of loans is equal to ($300 billion - $30 billion) / 0.05 = $5,400 billion.

Suppose the Banking System Currently Has $300 Billion in Reserves