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19 October, 16:10

A bank has a 5 percent reserve requirement, $5,000 in deposits, and has loaned out all it can given the reserve requirement. a. It has $25 in reserves and $4,975 in loans. b. It has $250 in reserves and $4,750 in loans. c. It has $1,000 in reserves and $4,000 in loans. d. None of the above is correct.

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  1. 19 October, 18:08
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    Option B is the correct answer.

    It has $250 in reserves and $4,750 in loans.

    Explanation:

    5% of $5000.

    Reserves = 0.05*$5000 = $250

    Loan amount that can be given out = $5000 - $250 = $4750.
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