Main Street Bank sets its loans on the basis of a 5% reserve requirement and has $100 million cash in its vaults. (a) Wh

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answerhappygod
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Main Street Bank sets its loans on the basis of a 5% reserve requirement and has $100 million cash in its vaults. (a) Wh

Post by answerhappygod »

Main Street Bank sets its loans on the basis of a 5%
reserve requirement and has $100 million cash in its
vaults.
(a) What is the maximum amount of loans the
bank can make?
(b) If the bank has made loans of $50 million to
real-estate firms and is required to keep a 50%
reserve requirement against such loans, how does
this change your answer?
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