Answered

A commercial bank has required reserves of $60 million and the reserve ratio is 20 percent. If the bank is fully loaned up, what is the maximum total checkable-deposits the bank can legally support?

Answer :

Answer:

$300 million

Explanation:

Data provided in the question:

Required reserves by commercial bank = $60 million

Reserve ratio of the commercial bank = 20% = 0.20

Now,

Reserve ratio is given as:

Reserve ratio = [ Reserves ] ÷ [ Checkable deposits ]

or

0.20 = $60 million ÷ [ Checkable deposits ]

or

Checkable deposits = $60 million ÷ 0.20

or

Checkable deposits = $300 million

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