1.Balance sheet Operations A. Here is the balance sheet of a commercial bank (in Smi). Assets...

 

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1.Balance sheet Operations A. Here is the balance sheet of a commercial bank (in Smi). Assets Reserves $ 1200 Liabilities and net worth Checking Deposits Net worth $3200 Other assets 2800 800 Assume the reserve ratio is 25 percent (1/4) for all questions below. (a) The bank's required reserves are (b) The bank has excess reserves of S (c) The maximum safe amount this bank in loans can make is S B. Assume the bank in the above example makes a loan to one of its depositors for $800. What will its balance sheet look like after the loan is made? (Assume no cash drainage) Assets Reserves $ Liabilities and net worth Demand deposits S Net worth Other assets S C. If the loan borrower above now writes a check for $800 in favor of a business that does its banking with another bank, what will the bank's balance sheet look like after the check is drawn and cleared? Assets Liabilities and net worth Reserves $ Other assets Demand deposits S Net worth $ The hank's required reserves are The bank's required reserves are 1. The bank has a deficiency of reserves equal to S 2. If the bank can't borrow the needed reserves, by how much must it contract its deposits? D. Here is a consolidated balance sheet for the commercial banking system. Assets Liabilities and net worth Demand deposits Reserves $5,000 $30,000 2,000 Other assets 27,000 Net worth 1. If the reserve ratio is 10 percent, the banking system is able to expand the money supply by S 2. If the reserve ratio is raised to 20 percent, the banking system will be deficient in reserves by $ If the banking system cannot borrow the needed reserves, it must contract the deposits by S 1.Balance sheet Operations A. Here is the balance sheet of a commercial bank (in Smi). Assets Reserves $ 1200 Liabilities and net worth Checking Deposits Net worth $3200 Other assets 2800 800 Assume the reserve ratio is 25 percent (1/4) for all questions below. (a) The bank's required reserves are (b) The bank has excess reserves of S (c) The maximum safe amount this bank in loans can make is S B. Assume the bank in the above example makes a loan to one of its depositors for $800. What will its balance sheet look like after the loan is made? (Assume no cash drainage) Assets Reserves $ Liabilities and net worth Demand deposits S Net worth Other assets S C. If the loan borrower above now writes a check for $800 in favor of a business that does its banking with another bank, what will the bank's balance sheet look like after the check is drawn and cleared? Assets Liabilities and net worth Reserves $ Other assets Demand deposits S Net worth $ The hank's required reserves are The bank's required reserves are 1. The bank has a deficiency of reserves equal to S 2. If the bank can't borrow the needed reserves, by how much must it contract its deposits? D. Here is a consolidated balance sheet for the commercial banking system. Assets Liabilities and net worth Demand deposits Reserves $5,000 $30,000 2,000 Other assets 27,000 Net worth 1. If the reserve ratio is 10 percent, the banking system is able to expand the money supply by S 2. If the reserve ratio is raised to 20 percent, the banking system will be deficient in reserves by $ If the banking system cannot borrow the needed reserves, it must contract the deposits by S

Answer rating: 100% (QA)

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