For each step please list the relevant accounting status for the bank, the lendee, and the impact on the money supply in the economy, given:
Your bank has 10% reserve requirement. There is no penalty for early loan
payoff. Your credit is approved, just got a 100k loan from a bank.
- "bank ABC" 'deposits' the loan money in lendee's "bank ABC" account
- The bank is now risking a loss of what?:
- 20k, or 100k?
- What does the bank's balance sheet look like?
- What happened to money supply in economy?
- did it go up by 90k?
- What happened to capital reserve of bank?
- did it go down by 20k?
- You hold the money in your account for an insignificant amount of
time so the interest is negligible, then you pay back the loan.
- There should be no net change to the bank's balance sheet.
- There should be no net change to the money supply in the economy.
- Did this loan payoff destroy 90k in the economy?
Lendee spends entire loan on goods or services. Pays it back after
30 years under 3% compound interest - all same questions...
- posted 6 years ago