Suppose That the Bank Has the Following Balance Sheet If the Bank's Reserve Ratio Is 0

question 38

Essay

Suppose that the bank has the following balance sheet:
$$\begin{array} { l r | l r } { \text { Assets (dallars) } } && { \text { Liabilitie (dallars) } } \\\hline \text { Reserves } & 75000 & \text { Deposits } & 500000 \\\text { Loans } & 430000 & \text { Net Worth } & 5000\end{array}$$ If the bank's reserve ratio is 0.1,what is the maximum the bank can loan out? Suppose that the bank intends to loan out the maximum amount it can.Show the immediate impact of the loan on the bank's balance sheet.
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