Assume that the Paris First National Bank currently has deposits of 20 million. If the current required reserve ratio is raised from 20 percent to 40 percent, then:
a. Paris First National Bank does not have to comply with the Federal Reserve mandate.
b. required reserves will decrease from 16 million to 12 million.
c. excess reserves will automatically increase by 20 million.
d. Paris First National Bank must close out 4 million in loans.
e. Paris First National Bank must increase its required reserves from 4 million to 8 million.
Question 2
Assume that the Paris First National Bank is a thriving bank with deposits of 20 million. If the required reserve ratio is 20 percent and the bank is fully loaned out, the bank will have outstanding loans totaling:
a. 2 million.
b. 4 million.
c. 10 million.
d. 16 million.
e. 20 million.
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