Exhibit 19-3 Balance sheet of Tucker National Bank

-Assume the Fed purchases a government security from a private dealer and pays with a Fed check of $100,000.If this check is deposited by the dealer in the bank shown in Exhibit 19-3,the bank can extend new loans in the amount of:

Question

Exhibit 19-3 Balance sheet of Tucker National Bank
 
-Assume the Fed purchases a government security from a private dealer and pays with a Fed check of $100,000.If this check is deposited by the dealer in the bank shown in Exhibit 19-3,the bank can extend new loans in the amount of:

Quizplus · Accepted Answer

When the Fed purchases a government security, it increases the reserves of the bank where the check is deposited. Assuming a reserve requirement of 20%, the bank can lend out 80% of the $100,000 deposit, which is $80,000.

Exhibit 19-3 Balance Sheet of Tucker National Bank