Question

If the reserve rate is 4% and the bank receives a deposit of 12000 how much of the 12000 is the bank free to Loan

Answer 1

11,520

Explanation:

The reserve rate simply refers to the amount the bank sets aside as reserves. In this case, the bank sets aside 4% of deposits made by its customers implying the bank would loan out 96% of all deposits made; so we have

12000x 0.96 = 11,520 is free to loan out