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

question 38

Essay

Suppose that the bank has the following balance sheet:
$$\begin{array} { | l r | l r | } \hline { \text { Assets } } & & { \text { Liabilities } } \\\hline \text { Reserves } & \$ 75,000 & \text { Deposits } & \$ 500,000 \\\hline \text { Loans } & \$ 430,000 & \text { Net worth } & \$ 5,000 \\\hline\end{array}$$ 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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