You are given this account for a bank: Assets Liabilities Reserves $1,200 $8,000 Deposits Loans 6,800 The
Question:
You are given this account for a bank:
Assets Liabilities
Reserves $1,200 $8,000 Deposits
Loans 6,800
The required reserve ratio is 10 percent.
a. How much is the bank required to hold as reserves given its deposits of $8,000?
b. How much are its excess reserves?
c. By how much can the bank increase its loans?
d. Suppose a depositor comes to the bank and withdraws $500 in cash. Show the bank’s new balance sheet, assuming the bank obtains the cash by drawing down its reserves. Does the bank now hold excess reserves? Is it meeting the required reserve ratio? If not, what can it do?
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a The bank is required to hold 018000 800 in reser...View the full answer
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Related Book For 
Principles of Macroeconomics
ISBN: 978-0134078809
12th edition
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster
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