A commercial bank in Indonesia has total deposits of 500 billion rupiah and is required to keep 10% as reserves. What is the maximum amount the bank can lend?

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Question

A commercial bank in Indonesia has total deposits of 500 billion rupiah and is required to keep 10% as reserves. What is the maximum amount the bank can lend?

Accepted Answer

450 billion rupiah — Award 1 mark for correct calculation. Required reserves = 10% × 500 billion = 50 billion rupiah. Maximum lending = 500 billion − 50 billion = 450 billion rupiah. A is incorrect — this is the reserve amount, not the lending capacity. C is incorrect — this ignores the reserve requirement. D is incorrect — this incorrectly adds reserves to deposits.

Answer

50 billion rupiah

Answer

550 billion rupiah

Answer

500 billion rupiah

Answer

450 billion rupiah

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