Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system. All figures
Question:
a. What amount of excess reserves does the commercial banking system have? What is the maximum amount the banking system might lend? Show in column 1 how the consolidated balance sheet would look after this amount has been lent. What is the monetary multiplier?
b. Answer the questions in part a assuming the reserve ratio is 20 percent. Explain the resulting difference in the lending ability of the commercial bankingsystem.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Assets Liabilities and net worth Reserves 52 Securities Checkable deposits $200 48 Loans 100
Step by Step Answer:
a Required reserves 50 billion 25 of 200 billion so excess reserves 2 billion 52 billion ...View the full answer
Economics
ISBN: 978-0073375694
18th edition
Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn
Related Video
This video is about ways to attempt consolidated balance sheet questions. since the unconsolidated financial statements of parent and subsidiary companies are prepared separately, consolidating the balance sheets of both companies is critical and sometimes becomes complex. the tutorial will guide students on to how questions on attempting questions on consolidated financial statements in an easier yet more effective way.
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