Question

A commercial bank has excess reserves of $5,000 and a required reserve ratio of 20 percent. it makes a loan of $6,000 to a borrower. the borrower writes a check for $6,000 that is deposited in another commercial bank. after the check clears, the first bank will be short of reserves in the amount of

Answer 1

Answer:

the reserves of the bank are short by 1,000

Explanation:

it could loan up to 5,000 dollars

but because it make a new loan of 6,000

their reserves decreases by 6,000

5,000 - 6,000 = (1,000)

the reserves of the bank are now short by 1,000

the reserve ratio is not used in this calculations as the 6,000 dollar from the loan leave the bank once the check is cleared