If Joe deposits $2,000 in his bank and the desired reserve ratio is 10 percent, what is the amount of new loans that the bank can make?
A) $2,000
B) $200
C) $1,800
D) $1,900
E) $2,200

Question

Quizplus · Accepted Answer

The desired reserve ratio is 10 percent, so the bank must keep 10 percent of the deposit as a reserve. Therefore, the amount of money that the bank can loan is 90 percent of the deposit.

90 percent of $2,000 = $1,800

Therefore, the amount of new loans the bank can make is $1,800.

If Joe Deposits $2,000 in His Bank and the Desired