If a bank desires to hold no excess reserves,the reserve requirement is 8 percent,and it receives a new deposit of $500,
A)its required reserves increase by $40.
B)its total reserves initially increase by $460.
C)it will be able to make a new loan of up to $492.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The required reserves are calculated as 8% of the new deposit, which is $500. Therefore, the required reserves increase by 0.08 * $500 = $40.

If a Bank Desires to Hold No Excess Reserves,the Reserve