Question

Jane wins ​$100 comma 000 playing the​ lottery, and instead of spending​ it, she deposits it into her checking account at the First Bank of Anywhere. Her bank makes a loan ​(equal to its excess​ reserves) to​ Mary, who uses the money to remodel her home. The remodeling company deposits the money into the Second Bank of Anywhere. The required reserve ratio is 4 percent and each bank initially has no excess reserves. The amount of the loan made by the First Bank equals ​$ nothing. ​(Enter your response as an​ integer.)

Answer 1

The loan made by the First bank of Anywhere was 96,000

Step-by-step explanation:

The bank had no excess reserves so it has take 4% of Jane's deposit to build reserve and leave the rest as loanable funds:

100,000 x (1 - 4% required reserve ratio) = $96,000 loanable funds

We must not mistkae this with the actual increase in the money supply which is calculated in a different way. This is just the first of a series of loan that different bank will do increasing the money supply.