Consider the following T-account for a bank:
If the bank's reserve ratio is 20 per cent and the bank is holding no excess reserves,the bank at this point will not make any more loans.

Question

Consider the following T-account for a bank:
  If the bank's reserve ratio is 20 per cent and the bank is holding no excess reserves,the bank at this point will not make any more loans.

Quizplus · Accepted Answer

The bank cannot make any more loans because it has already reached its required reserve ratio of 20%. It cannot lend out any more funds without risking not being able to meet its reserve requirements.

Consider the Following T-Account for a Bank