Jane wins $100,000 playing the lottery, and instead of spending it, she deposits

Question

Jane wins $100,000 playing the lottery, and instead of spending it, she deposits it into her checking account at the First Bank of Anywhere. Her bank makes a loan (equal to its excess reserves) to Mary, who uses the money to remodel her home The remodeling company deposits the money into the Second Bank of Anywhere The required reserve ratio is 4 percent and each bank initially has no excess reserves. The amount of the loan made by the First Bank equals S. (Enter your response as an integer.) The amount of the remodeling company's deposit that Second Bank is required to keep as reserves equals $ -(Enter your response as an integer)

Explanation / Answer

Answer

the amount of deposit=100000

the amount of required reserve=deposit*reserve requirement

=100000*0.04

=4000

the first bank anywhere can give loan =deposit-reserves=$96000

The deposit in the second bank is $96000

require keeping as reserves=deposit*ratio=96000*0.04

=3840

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