Suppose That the Bank Has the Following Balance Sheet

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The Answer is Since the bank's reserve ratio is 10 per cent,its reserves will be $50 000 ($50 000 = 0.1 × $500 000),so that excess reserves are $25 000 ($25 000 = $75 000 - $50 000).If the bank loans out that amount the effect on the balance sheet is shown in the following balance sheet.Essentially,reserves will be reduced by $25 000 and loans will increase by $25 000.Note that the right-hand side of the balance sheet does not change: <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB4180/11ea8b22_716e_3c17_b2e9_35a65c498e11_TB4180_00.jpg" alt="Since the bank's reserve ratio is 10 per cent,its reserves will be $50 000 ($50 000 = 0.1 × $500 000),so that excess reserves are $25 000 ($25 000 = $75 000 - $50 000).If the bank loans out that amount the effect on the balance sheet is shown in the following balance sheet.Essentially,reserves will be reduced by $25 000 and loans will increase by $25 000.Note that the right-hand side of the balance sheet does not change:  " class="answers-bank-image d-block" rel="preload" >

Suppose That the Bank Has the Following Balance Sheet

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