Suppose That Initially a Bank Has Excess Reserves of $800

question 101

Multiple Choice

Suppose that initially a bank has excess reserves of $800 and the reserve ratio is 20%. Then Andy deposits $1,000 of cash in his checking account and the bank lends $600 to Molly. That bank can lend an additional:

• A) $200.
• B) $1,000.
• C) $800.
• D) $2,400.