The commercial banks in Fundland have
$$\begin{array} { l l }
\text { Reserves } & \$ 500 \text { million } \
\text { Loans } & \$ 3,500 \text { million } \
\text { Deposits } & \$ 4,000 \text { million } \
\text { Total assets } & \$ 5,000 \text { million }
\end{array}$$
The banks hold no excess reserves.
a) Calculate the banks' desired reserve ratio.
b) An immigrant arrives in Fundland with $10 million,which she deposits in a bank.How much does the immigrant's bank lend initially?

Question

The commercial banks in Fundland have
 $$\begin{array} { l l } 
\text { Reserves } & \$ 500 \text { million } \
\text { Loans } & \$ 3,500 \text { million } \
\text { Deposits } & \$ 4,000 \text { million } \
\text { Total assets } & \$ 5,000 \text { million }
\end{array}$$ 
The banks hold no excess reserves.
a) Calculate the banks' desired reserve ratio.
b) An immigrant arrives in Fundland with $10 million,which she deposits in a bank.How much does the immigrant's bank lend initially?

Quizplus · Accepted Answer

The Answer of The commercial banks in Fundland have
 $$\begin{array} { l l } 
\text { Reserves } & \$ 500 \text { million } \
\text { Loans } & \$ 3,500 \text { million } \
\text { Deposits } & \$ 4,000 \text { million } \
\text { Total assets } & \$ 5,000 \text { million }
\end{array}$$ 
The banks hold no excess reserves.
a) Calculate the banks' desired reserve ratio.
b) An immigrant arrives in Fundland with $10 million,which she deposits in a bank.How much does the immigrant's bank lend initially?

The Commercial Banks in Fundland Have The Banks Hold No Excess Reserves