If the bank is now in a position to extend additional loans of $8,000. The legal reserve requirement is: 20 percent.
Legal reserve requirement
Using this formula
Legal reserve requirement=( Demand deposit -Additional loans/Demand deposit
Let plug in the formula
legal reserve requirement=($10,000-$8,000)/$10,000
Legal reserve requirement=$2,000/$10,000×100
legal reserve requirement=20%
Therefore the legal reserve requirement is: 20 percent.
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