If a bank has a reserve requirement of 20% and receives a new deposit of $1,000, how much can it lend out?

When a bank receives a deposit, it must keep a certain percentage of that money as reserves, which is not available for lending. In this case, the reserve requirement is 20%, meaning the bank must keep $200 from the $1,000 deposit. This leaves the bank with $800 that it can lend out to borrowers. By lending this money, the bank helps create more money in the economy, as the borrowers can spend it, and that money can be deposited again in the bank. This process shows how banks play a crucial role in money creation while still following reserve requirements.