A bank has total reserve of $20 million. Of that, $2 million are required reserves and $18 million are excess reserves.

Question

A bank has total reserve of $20 million. Of that, $2 million are required reserves and $18 million are excess reserves.

In this scenario, how much can the back loan out?
A. $2 million
B. $18 million
C. $20 million
D. $22 million
E. None of these

Answer 1

C. $20 million

The bank can loan out the total reserves minus the required reserves, which is $20 million - $2 million = $18 million. So, the bank can loan out $18 million.