Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 8 percent, then the bank can make a maximum loan of .

(a) $0
(b) $2 million
(c) $8 million
(d) $10 million

b. $ 2million loan

Explanation:

Base on the scenario been described in the question, if we observe, formally, the bank was having $1million in the checking account deposits with the federal reserve with no excess, and the reserve ratio is 10 percentage . since the federal reserve reduced it reserve ratio to 8 percent, the bank will have excess reserve of 2 percent which it can give a maximum loan of 2million.

$2 million

Explanation:

Reserve is the amount of cash a bank is required to keep without using in its daily transactions.

This is required by monetary authorities as a backup in case of business failure.

Reserve is calculated as

Reserve= Reserve percentage * Deposits

Initial reserves= 0.10 * 100 million= $10 million

Present reserves= 0.08 * 100 million= $8million

Excess reserve = Initial reserves - Present reserves

Excess reserve= 10 million - 8 million

Excess reserve= $2 million

Since the excess reserve is positive this amount can be given out as loans

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.