Suppose the Fed Requires Banks to Hold 10 Percent of Their

question 404

Multiple Choice

Suppose the Fed requires banks to hold 10 percent of their deposits as reserves. A bank has $20,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have to lend out if it decides to hold only required reserves?

• A)$29,000
• B)$28,100
• C)$19,100
• D)$11,000

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