Table 13-1

-Refer to Table 13-1.If someone deposits $400 into the First Bank of Mason City,
A)the bank will be able to make additional loans totaling $320.
B)excess reserves initially increase by $320.
C)required reserves initially increase by $80.
D)all of the above are correct.

Question

Table 13-1
 
-Refer to Table 13-1.If someone deposits $400 into the First Bank of Mason City,
A)the bank will be able to make additional loans totaling $320. 
B)excess reserves initially increase by $320. 
C)required reserves initially increase by $80. 
D)all of the above are correct.

Quizplus · Accepted Answer

When $400 is deposited, the required reserve ratio is assumed to be 20% (since $80 is 20% of $400). Therefore, required reserves increase by $80, excess reserves increase by $320, and the bank can make additional loans totaling $320.

Table 13-1 -Refer to Table 13-1.If Someone Deposits $400 into the First