Suppose That the Bank Has the Following Balance Sheet If the Required Reserve Ratio Is 10 Percent,what Is the

question 138

Essay

Suppose that the bank has the following balance sheet:
$\begin{array}{|c|l|l}\hline{\text { Assets }} &{\text { Liabilities }} \\\hline \text { Reserves } \$ 75,000 & \text { Deposits } \$ 500,000 \\\hline \text { Loans } \$ \$ 30,000 & \text { Net worth } \$ 5,000 \\\hline\end{array}$
If the required reserve ratio is 10 percent,what is the maximum the bank can loan out? Suppose the bank makes this loan and the borrower spends the money,which is deposited in a different bank.Show the impact of these transactions on the bank's balance sheet.

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Definitions:

Property Rights

The legal rights to own, use, and dispose of land, buildings, or belongings.

Free-Black Communities

Social and economic enclaves formed by African Americans who were not enslaved, often found in Northern states and some Southern cities before the Civil War.

Racial Residential Segregation

Describes the practice of living in separate neighborhoods or areas based on racial or ethnic backgrounds, often as a result of historical policies, economic disparities, or social practices.

Black-Run Institutions

Organizations or establishments operated and managed primarily by people of African descent.