Table 14-3

-Refer to Table 14-3.Consider the following simplified balance sheet for a bank: If the required reserve ratio is 10 percent,the bank can make a maximum loan of

Question

Table 14-3
 
-Refer to Table 14-3.Consider the following simplified balance sheet for a bank: If the required reserve ratio is 10 percent,the bank can make a maximum loan of

Quizplus · Accepted Answer

The bank can loan out an amount equal to its excess reserves. If the required reserve ratio is 10%, the bank must keep 10% of its deposits as reserves. Assuming the bank's total reserves are $7,000 and its deposits are $50,000, the required reserves are $5,000 (10% of $50,000). Therefore, the excess reserves are $2,000 ($7,000 - $5,000), which is the maximum loan the bank can make.

Table 14-3 -Refer to Table 14-3.Consider the Following Simplified Balance Sheet for Simplified