2,000. If the required reserve ratio is 10% then required reserves are 10% of deposits or 50,000*. 10= 5,000. This means 7,000-5,000= $2,000 is available to make loans
A loan is the lending of money by one or more people, businesses, or other entities to other people, businesses, or other entities. The recipient, or borrower, incurs a debt and is often responsible for both the main amount borrowed as well as interest payments on the debt until it is repaid.
The promissory note used to prove the obligation will typically include information like the principal amount borrowed, the interest rate the lender is charging, and the due date for repayment. When a loan is made, the subject asset(s) are temporarily reallocated between the lender and the borrower.
The payment of interest encourages the lender to make the loan. Each party to a legal loan
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