Bank Balance Sheet Analysis
Analyze the following scenario and determine the bank's new net worth. Explain your reasoning by describing how the transaction affects the bank's assets and liabilities.
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Economics
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Introduction to Macroeconomics Course
Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Application in Bloom's Taxonomy
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Bank's Profit Motive for Lending
Bank Balance Sheet Analysis
A commercial bank initially has total assets of 100 units and total liabilities of 80 units. The bank then accepts a new deposit of 50 units from one customer and simultaneously issues a new loan of 50 units to another customer. What is the bank's net worth immediately after these two transactions are completed?
A commercial bank accepts a $10,000 deposit from a customer and simultaneously issues a new loan for $10,000 to another customer. Which statement best explains why the bank's net worth remains unchanged immediately following these transactions?
When a bank accepts a new deposit and uses those funds to issue a loan of the exact same amount, its net worth increases because it now holds a new, valuable asset (the loan).