Assume that a bank must keep reserves of 20% against deposits. The bank receives a primary deposit of $50,000. What amount of excess reserves can the bank safely lend?

Name: Assume that a bank must keep reserves of 20% against deposits. The bank receives a primary deposit of $50,000. What amount of excess reserves can the bank safely lend?
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The bank must keep 20% of $50,000 as reserves, which is $10,000. Therefore, the excess reserves that can be lent out are $50,000 - $10,000 = $40,000.

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