Assume That Empathy State Bank Begins with This Balance Sheet

question 167

Essay

Assume that Empathy State Bank begins with this balance sheet and is fully loaned-up. Use the information given to answer the following questions. I. For this state bank, legal reserves are defined to be vault cash plus deposits at the Fed. What are this bank's reserves?
II. What is the value of the reserve requirement?
III. If the bank receives a new deposit of $5,000 and the bank wants to remain fully loaned-up, how much of this new deposit will the bank lend out?
IV. What is the potential money multiplier equal to?
V. When the new deposit to Empathy State Bank works itself through the entire banking system (assume all banks are fully loaned-up), how much new money may be created?

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Definitions:

Prejudice

Preconceived opinions or judgments about individuals or groups without sufficient knowledge, often rooted in stereotypes, leading to unfair treatment.

Discrimination

The behavioural expression of prejudice.

Attitude

(a) A relatively enduring organization of beliefs, feelings, and behavioral tendencies towards socially significant objects, groups, events, or symbols. (b) A general feeling or evaluation – positive or negative – about some person, object, or issue.

Behaviour

What people actually do that can be objectively measured.