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

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