Question

Assume the reserve requirement is 15 percent and a bank initially has no excess reserves. If a customer deposits $1,000, how much of that deposit can be loaned?

Answer 1

$850

Step-by-step explanation:

Firstly, we calculate the amount of the deposited amount that should be held in the bank reserves. According to the question, this is just 15% of the amount deposited.

This is same as 15/100 * 1000 = $150

Since $150 is kept in reserve, the amount that can be loaned is thus $1000-$150 = $850

It is this $850 that is in excess reserve