Question

If you deposit $ 100 in cash into a checking account at Friedman National, you wouldd...

If you deposit $ 100 in cash into a checking account at Friedman National, you wouldd increase the bank's liablity to make new loans by

A. $90

B. $100

C. $900

D. $1000

(i.e, $100 mulitplied by the reciprocal of the reserve requirement.

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Homework Answers

Answer #1

Current Reserve requirement for all banks by federal reserve baord is 10% .so after meeting the reserve requirement ,bank can loan out remaining deposits.

Reserve requirement : 100* 10% = 10

Bank liability to make new loan increase by : deposit - minimum reserve requirement

                          = 100 -10

                          = $ 90

correct otpion is "A"

                          =

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