Below is the balance sheet for Third National Bank. The legal reserve requiremen

Question

Below is the balance sheet for Third National Bank. The legal reserve requirement is 10%. -------------------------------------------------------------------------------- Assets Liabilities -------------------------------------------------------------------------------- Reserves $40,000 Demand deposits $100,000 Loans $60,000 Total $100,000 Total $100,000 Third National has reviewed Fred's loan application and has decided to approve the loan. Fred borrows the $20,000 to pay for college-related expenses. Fred deposits the $20,000 in his checking account at Third National because tuition is not due for another week. At the moment the loan is completed, what are the new entries in the bank's balance sheet? A. The bank's reserves decrease by $20,000 and its loans increase by $20,000. B. The bank's liabilities are reduced by $20,000 and its assets increase by $20,000. C. Loans increase by $20,000 and demand deposits increase by $20,000. D. Demand deposits increase by $20,000 and the capital stock decreases by $20,000. E. Third National should not make this loan; there are insufficient reserves. Third National has reviewed Fred's loan application and has decided to approve the loan. Fred borrows the $20,000 to pay for college-related expenses. Fred deposits the $20,000 in his checking account at Third National because tuition is not due for another week. At the moment the loan is completed, what are the new entries in the bank's balance sheet?

Explanation / Answer

For numba 3, the answer is A. Cuz I am choosing it, and it is in wikipedia

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.