Assume that First Purity Bank begins with the balance sheet below and is fully loaned-up. Answer the
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a. What is the reserve requirement equal to?
b. If the bank receives a new deposit of $1 million and the bank wants to remain fully loaned-up, how much of this new deposit will the bank loan out?
c. When the new deposit to First Purity Bank works itself through the entire banking system (assume all banks keep fully loaned-up), by how much will total deposits, total loans, and total reserves increase?
d. What is the potential money multiplier equal to in this case?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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a The reserve requirement is equal to 35 7000002000000 b The bank m...View the full answer
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