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How much loans will the third bank issue

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Banks wish to hold no excess reserves, desired reserve ratio is the same for all banks and there is no currency drain. The following T-account represents the balance sheet of First commercial bank:

Assets/Liabilities

Reserves 100
Deposits 1000
Loans 1050
Capital 150

Problem 1: The First bank's reserves are on target. Then receives a new deposit of $ 294 . How much loans will the Third bank (i.e. the third bank in the deposit creation process) issue?

a. 265.33
b. 214.33
c. 294.00
d. 391.31
e. None of the answers are correct.

Reference no: EM132969715

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