Assume the Reserve Requirement Is 10 Percent

Assume the reserve requirement is 10 percent. First National Bank has vault cash and deposits with the Fed of $40 million, loans and securities of $360 million, and demand deposits of $400 million. First National:

A) ​is not in a position to extend additional loans.
B) ​could extend a maximum of $10 million of additional loans.
C) ​could extend a maximum of $20 million of additional loans.
D) ​could extend a maximum of $40 million of additional loans.

Correct Answer:

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