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What is the maximum amount of new loans the bank could lend with the given amounts of reserves?

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Adioabiolaidn

The maximum amount of new loans to the bank could lend with the given amounts of reserve is; $400million.

Maximum amount of New loans

It follows from macroeconomics calculations that;

The maximum amount of new loans to the bank!= The current amount in reserves * The multiplier.

Given that the amount in reserves is $80 million.

  • $80 million * (1/20%)
  • $80 million * (5) = $400 million.

Ultimately, the maximum amount in new loans given the amount in reserves is; $400 million.

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