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The balance sheet of the First Bank of Cloud City is below. The reserve requirement is 25%. Assets Liabilities Reserves: $21,000 Demand deposits: $80,000 Loans:
The balance sheet of the First Bank of Cloud City is below. The reserve requirement is 25%. Assets Liabilities Reserves: $21,000 Demand deposits: $80,000 Loans: $59,000 Owners' equity: $0 What is the maximum change in new loans that can be created throughout the banking system based on this balance sheet? Choose 1 answer: Choose 1 answer: (Choice A) Loans can decrease by $4,000 at most. A Loans can decrease by $4,000 at most. (Choice B) Loans cannot change; only the money supply can change. B Loans cannot change; only the money supply can change. (Choice C) Loans can increase by up to $4,000. C Loans can increase by up to $4,000. (Choice D) Loans can decrease by $21,000 at most. D Loans can decrease by $21,000 at most. (Choice E) Loans can increase by $21,000 at most. E Loans can increase by $21,000 at most
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