Assume the required reserve ratio is 20%, and a bank's excess reserves are $50 million. Which of the following accurately explain why checkable deposits resulting from new loans based on excess reserves are not likely to generate the maximum of $50 million x 5 = $250 million? Check all that apply. Some banks want to hold some excess reserves instead of making loans. Some banks want to make more loans than their reserves will allow. Some depositors want to hold a portion of their money in cash. Some people want to use credit cards to make all of their purchases and keep their cash in the bank.
Assume the required reserve ratio is 20%, and a bank's excess reserves are $50 million. Which of the following accurately explain why checkable deposits resulting from new loans based on excess reserves are not likely to generate the maximum of $50 million x 5 = $250 million? Check all that apply. Some banks want to hold some excess reserves instead of making loans. Some banks want to make more loans than their reserves will allow. Some depositors want to hold a portion of their money in cash. Some people want to use credit cards to make all of their purchases and keep their cash in the bank.
Chapter15: Money Creation
Section: Chapter Questions
Problem 9SQP
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Transcribed Image Text:Assume the required reserve ratio is 20%, and a bank's excess reserves are $50 million.
Which of the following accurately explain why checkable deposits resulting from new loans based on excess reserves are not likely to generate the
maximum of $50 million x 5 = $250 million? Check all that apply.
Some banks want to hold some excess reserves instead of making loans.
Some banks want to make more loans than their reserves will allow.
Some depositors want to hold a portion of their money in cash.
Some people want to use credit cards to make all of their purchases and keep their cash in the bank.
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