Suppose all banks have zero excess reserves. The Fed buys bonds for $1 million and a bond dealer deposits the check in his or her bank. The required reserve ratio is 8 percent. The bank loans out the maximum it is allowed to a local business. The business writes a check for the full amount for supplies, which is then deposited in another bank. The largest loan the second bank can make is: The largest loan the second bank can make is $. (Round your answer to the nearest dollar.)
Suppose all banks have zero excess reserves. The Fed buys bonds for $1 million and a bond dealer deposits the check in his or her bank. The required reserve ratio is 8 percent. The bank loans out the maximum it is allowed to a local business. The business writes a check for the full amount for supplies, which is then deposited in another bank. The largest loan the second bank can make is: The largest loan the second bank can make is $. (Round your answer to the nearest dollar.)
Chapter13: The Federal Reserve System
Section: Chapter Questions
Problem 10WNG
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