Explain the bank chooses not to hold any excess reserves

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Reference no: EM1358730

When $1 million is deposited at a bank, the required reserve ratio is 20 percent, and the bank chooses not to hold any excess reserves but makes loans instead (which are spent by the borrowers), then, in the bank's final balance sheet

A) The liabilities of the bank increase by $1,000,000.

B) The liabilities of the bank increase by $800,000.

C) Reserves increase by $160,000.

D) The assets at the bank increase by $800,000.

Reference no: EM1358730

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