A required reserve ratio for a bank is the percentage of outstanding loans, made by the bank to borrowers, that must be held in the reserves of the bank in the form of cash or readily liquid assets. The required reserve ratio is often used as a tool in monetary policy for the purpose of influencing interest and borrowing rates, as it controls the amount of available funds that financial institutions can make loans with.
In the question asked, the required reserve ratio is 20%. This means the bank must have at minimum 20% of the amount of outstanding loans in liquid reserve at the bank. The question states that the bank does not have any excess reserves, so excess reserves = $0. Then $10,000 is lent out. This means that the bank now has a reserve deficiency of $10,000.
The correct answer is A: $10,000