# Answer the following questions. a. If a bank had reserves of $30,000 and demand deposits of$200,000 (and no other deposits), how much could it lend out if faced a required reserve ratio of b. If the bank then received a new $40,000 deposit in a customer's demand deposit account, how much could it now lend out if it faced a required reserve ratio of Â BuyFindarrow_forward ### Exploring Economics 8th Edition Robert L. Sexton Publisher: SAGE Publications, Inc ISBN: 9781544336329 #### Solutions Chapter Section BuyFindarrow_forward ### Exploring Economics 8th Edition Robert L. Sexton Publisher: SAGE Publications, Inc ISBN: 9781544336329 Chapter 25, Problem 16P Textbook Problem 3 views ## Answer the following questions.a. If a bank had reserves of$30,000 and demand deposits of $200,000 (and no other deposits), how much could it lend out if faced a required reserve ratio ofb. If the bank then received a new$40,000 deposit in a customer's demand deposit account, how much could it now lend out if it faced a required reserve ratio ofÂ

To determine

(a)

To compute:

The amount of money the bank could lend if a bank had a reserve of $30,000 and demand deposits of$200,000.

### Explanation of Solution

Given information:

The bank had reservesof $30,000 and demand deposits of$200,000. The bank reserve ratio is 10%.

Calculation of required reserve:

Requiredreserve=r×D=0.1×$200,000=$20,000

Calculation of excess reserve:

Excessreserve=ActualreserveRequiredreserve=$30,000$20,000=$10,000 The assets and liability of the bank should be equal. Therefore, Demanddepoists+Excessreserve=Reserve+Loans$200,000+$10,000=$30,000+LoansLoans=$210,000$30,000=$180,000 Similarly, The bank had reservesof$30,000 and demand deposits of $200,000. The bank reserve ratio is 15%. Calculation of required reserve: Requiredreserve=r×D=0.15×$200,000=$30,000 Calculation of excess reserve: Excessreserve=ActualreserveRequiredreserve=$30,000$30,000=$0

The assets and liability of the bank should be equal

To determine

(b)

To compute:

The additional dollar that can be lent out as a result of \$40,000 deposit.

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