Question

a commercial bank has $1,000,000 of customer checking deposits and actual reserves of $300,000. if the reserve ratio is 20 percent, what is the maximum amount of new loans the bank can extend?

Answer 1

The maximum amount of new loans the bank can extend is $800,000.

What is the maximum amount of new loans the bank can extend?

The reserve ratio is the amount of deposits that must be kept as reserves with the central bank. The money that is not kept as reserves can be used to create loans.

Maximum loan amount = deposit - (reserve ratio x deposits)

1,000,000 - (0.2 x 1,000,000) = $800,000

To learn more about required reserves, please check: https://brainly.com/question/26960248

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