Question

If the reserve rate is 4% and a bank receives a deposit of $12,000, how much of the $12,000 is the bank free to loan out?

Answer 1

A reserve rate is basically how much the bank needs to keep with them of the deposit. So, the bank must keep 4% of the $12,000 and is free to loan out the rest. So do the math.

4% So .04*12000 = amount bank has to keep. Then 12000-kept amount can be loaned out.