Question

Fiona deposits $2,000 into a savings account. If the Fed requires a 20 percent reserve ratio, how much of Fiona’s money can the bank lend?v

Answer 1

The amount the the fed require =

20/100 x 2,000 = 400

The amount of money that Fiona's bank can lend is : $ 2,000 - $ 400
= $ 1,600

Answer 2

The bank can lend $1600 of Fiona´s money.

Step-by-step explanation:

Hi, to solve this problem you have to calculate the 20 percent of the money that Fiona deposits. This result is the reserve ratio.

The reserve ratio is the percentage of deposits which commercial banks are required to keep as cash rather than lend out or invest

Then, subtract the reserve ratio to the savings account of Fiona.

So:

$2000 x 0,2 = $400 (reserve ratio)

$2000 - $400 = $1600

The bank can lend $1600 of Fiona´s money.