If a bank is required to hold 20% of deposits as reserves, what effect would an increase in the reserve requirement have on the bank's ability to create loans?

When a bank is required to hold 20% of its deposits as reserves, it can only lend out the remaining 80%. If the reserve requirement increases, for example, to 25%, the bank must hold more money in reserve and can lend out less. This means the bank has less money available to give loans to customers. With fewer loans available, there is less money flowing into the economy, which can slow down economic growth. For instance, if a bank had $1,000 in deposits, with a 20% reserve requirement, it could lend out $800, but with a 25% requirement, it would only be able to lend out $750.