The Fed sets a Reserve Requirement of 20%. A citizen takes $5000 from their cash holdings and places the money into a bank. Based on this action What is the initial amount the bank can lend out based on the deposit?

Question

Justin Castro

Advanced Placement (AP)

12 April, 01:59

The Fed sets a Reserve Requirement of 20%. A citizen takes $5000 from their cash holdings and places the money into a bank. Based on this action What is the initial amount the bank can lend out based on the deposit?

+4

Answers (1)

Know the Answer?

Andrew Wilkins · Answer 1

20 percent times 5000 is equals to 1000 dollars. 5000 take away 1000 is equal to 4000 dollars that the initial amount the bank can lend out based on the deposit.