If the bank of Waterloo receives a $20,000 deposit, and the reserve requirement is 20 percent,how much can the bank loan out? (Assume that before the deposit this bank is just meeting itslegal reserve requirement.
16, 000
If the reserve requirement is 20 percent, then the bank is required to hold 20% of the $20,000 deposit as reserves.
Required reserves = 20% * $20,000 = $4,000
Therefore, the bank can loan out the remaining amount, which is:
$20,000 – $4,000 = $16,000
So, the bank can loan out $16,000.
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