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15 July, 11:13

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 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.

$9,000

b.

$26,190

c.

$27,000

d.

$27,190

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Answers (1)
  1. 15 July, 12:08
    0
    correct option is c. $27,000

    Explanation:

    given data

    hold as reserve = 9 %

    excess reserves = $18,000

    sells bill = $9,000

    solution

    we know that here if bank sells off treasury bill to the Fed

    it is getting amount in return

    so that money complete lent out in the form of loan

    so here total amount that bank lent out is express as

    total amount that bank lent out = $18000 + $9000 ... 1

    total amount that bank lent out = $27000

    so correct option is c. $27,000
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