Sure, let's solve this step-by-step:
1. Understand the Reserve Rate: The reserve rate, also known as the reserve requirement, is the percentage of deposits that a bank must hold in reserve and cannot lend out. In this case, the reserve rate is 7%.
2. Calculate the Reserve Amount: To know how much money the bank must keep in reserve, you multiply the deposit amount by the reserve rate.
- Deposit amount = [tex]$9000
- Reserve rate = 7% or 0.07
The reserve amount is calculated as:
\[
\text{Reserve Amount} = \$[/tex]9000 \times 0.07 = \[tex]$630
\]
3. Determine the Amount Free to Lend: The bank is free to lend out the remaining part of the deposit after keeping the reserve amount. To find this, you subtract the reserve amount from the total deposit.
\[
\text{Amount Free to Lend} = \$[/tex]9000 - \[tex]$630 = \$[/tex]8370
\]
So, the bank is free to lend [tex]\( \$8370 \)[/tex] out of the [tex]\( \$9000 \)[/tex] deposit.
