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Jared Franks
on Nov 11, 2024

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The table below shows the balance sheet of Countybank.If the required reserve ratio is 10 percent,this bank alone can now increase its lending by _____.
Table 14.2
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COUNTYBANK
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 Assets  Liabilities and Net Worth  Cash $1,000 Checkable deposits $1,000\begin{array}{|l|l|l|l|}\hline\text { Assets } && \text { Liabilities and Net Worth } \\\hline & & \\\hline \text { Cash } & \$ 1,000 & \text { Checkable deposits }&\$1,000\\\hline\end{array} Assets  Cash $1,000 Liabilities and Net Worth  Checkable deposits $1,000

A) $1,000
B) $10,000
C) $0
D) $90
E) $900

Required Reserve Ratio

A mandated reserve that banks must keep on hand, usually a percentage of their deposits, determined by the central bank to ensure financial stability.

Checkable Deposits

Checkable deposits are bank account balances that depositors can easily withdraw or write checks against at any time, constituting a primary medium of exchange for personal and business transactions.

  • Decipher the role of the essential reserve ratio in the banking sector and its effect on the multiplication of money.
  • Outline how the act of lending enables commercial banks to produce money.
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SR
Scott RanceNov 14, 2024
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