A bank receives new deposits equal to 200,000 and the desired ...

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A bank receives new deposits equal to 200,000 and the desired reserve ratio is 10 percent. What is the amount of new loans the bank can make?
 
  What will be an ideal response?

Question 2

Economies of scale exist when the ________ a unit of a good ________.
 
  A) average cost of producing; falls as its output rate increases
  B) price; falls as its input rate decreases
  C) price; rises as its output rate increases
  D) average cost of producing; rises as its input rate increases

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Answer to Question 1

The bank can make new loans equal to the amount of its excess reserves. The bank's desired reserves equal (200,000 )  (0.10 ) = 20,000, leaving the bank with excess reserves of 180,000. As a result, the bank can make 180,000 in new loans.

Answer to Question 2

A