What is the maximum amount this bank can expand its loans?, Ask an Expert

Economics

Refer to the simplified balance sheet for a bank and answer the following problems.

Assets Liabilities
Reserves $10,000 Deposits $70,000
Loans $66,000 Stockholder's equity $6,000

a. If the required reserve ratio is 5 percent, how much in excess reserves does this bank hold?

b. What is the maximum amount this bank can expand its loans?

c. What will happen to the M1 money supply if it makes the loans in (b) above and those funds are deposited into another bank by the borrowers?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M952605

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