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.

Question

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.

Quizplus · Accepted Answer

The Answer of 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.

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