Advanced Placement (AP) High School

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?

Answers

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.
Answer 2

4000, is the initial amount the bank can lend out based on the deposit. The bank was the main work to the deposit, and they provided the loan.

What is bank?

The term bank refers to the financial institution offering the services related to the term money. The bank is manage financial system to handling accounts and manage the cash. The bank is the based on the main motive to the cash transaction. The charged the interest on the loan.

According  to the has given the amount are the based on the 20 percent Reserve Requirement and the $5000 are the cash holdings. The bank was the deposit the initial amount of the 4000 dollars. 20% times 5000 equals $1,000. 5000 – 1000 = 4000.

As a result, the 4000, is the initial amount the bank can lend out based on the deposit.

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