Question

Let’s assume a required reserve ratio of 10 percent.

If First Bank lends out its excess reserve of $90 and that money is deposited in Second Bank, then Second Bank has an excess reserve of $______ to lend.

Answer 1

The answer is 72.9 dollars.

Step-by-step explanation:

The reserve ratio of 10% means that bank must keep 10% percent of amount deposited in bank to meet emergency payments and can lend the remaining 90% to other banks. So the second bank can lend 81 dollars that is 90% of 81 dollars. As per this rule second bank has 72.9 dollars (90% of 81) to lend.