The maximum amount of new loans the bank can extend is $800,000.
The reserve ratio is the amount of deposits that must be kept as reserves with the central bank. The money that is not kept as reserves can be used to create loans.
Maximum loan amount = deposit - (reserve ratio x deposits)
1,000,000 - (0.2 x 1,000,000) = $800,000
To learn more about required reserves, please check: https://brainly.com/question/26960248
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