If the reserve requirement is 5 percent,a bank desires to hold no excess reserves,and it receives a new deposit of $10,then this bank
A)must increase its required reserves by $10.
B)will initially see its total reserves increase by $10.50.
C)will be able to make new loans up to a maximum of $9.50.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The reserve requirement is 5%, so the bank must hold $0.50 (5% of $10) as reserves and can loan out the remaining $9.50.

If the Reserve Requirement Is 5 Percent,a Bank Desires to Hold