Suppose banks desire to hold no excess reserves and that the Fed has set a reser

Question

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank,

First Raven’s required reserves increase by $480.

First Raven will be able to lend out $7,520.

First Raven’s assets and liabilities both will increase by $8,000.

All of the above are correct.

First Raven’s required reserves increase by $480.

First Raven will be able to lend out $7,520.

First Raven’s assets and liabilities both will increase by $8,000.

All of the above are correct.

Explanation / Answer

Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 6 percent. If you deposit $8,000 into First Raven Bank

D. All of the above are correct is correct answer.

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