The concept mentioned is the Required reserves. The answer is $200,000.
The reserve rate is the portion of reservable arrears that marketable banks must hold onto, rather than advance out or invest. This is a demand determined by the country's central bank, which in the United States is the Federal Reserve.
Given,
Reserve requirement rate = 20%
checkable deposit = $4 million
actual reserve =$1 million
Required reserve ratio = actual reserve * reserve rate
Required reserve ratio = 1,000,000 * 20%
Required reserve ratio = $200,000.
We can conclude by saying that a factual reserve of $1 million can safely advance out $200,000.
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