Answer to Question #112214 in Macroeconomics for Shernyka

Question

Imagine that the banking system received additional desposits of $100 million and that all the individual banks wish to retain their current liquidity ratio of 20%

Answer 1

The bank will only be able to issue loans of 80% percent of the money because they don't have access to the 20%which is in individual's banks. So they will issue loans of $80million