Assume that the required reserve ratio on checkable deposits is 10% and the public's holdings of...

 

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Assume that the required reserve ratio on checkable deposits is 10% and the public's holdings of currency do not change. If reserves in the banking system increase by $1 billion as a result of discount loans of $1 billion, and checkable deposits increase by $9 billion, why isn't the banking system in equilibrium? A. There are $100 billion of excess reserves that banks will seek to lend out. OB. There are $1 billion of excess reserves that banks will seek to lend out. c. There are $100 million- excess reserves that banks will seek to lend out. OD. The banking system is in equilibrium. Show the T-account for the banking system in equilibrium. Banking System Assets Reserves +$1 billion +$10 billion Loans +$1 billion $10 billion Liabilities Discount loans Checkable deposits Assume that the required reserve ratio on checkable deposits is 10% and the public's holdings of currency do not change. If reserves in the banking system increase by $1 billion as a result of discount loans of $1 billion, and checkable deposits increase by $9 billion, why isn't the banking system in equilibrium? A. There are $100 billion of excess reserves that banks will seek to lend out. OB. There are $1 billion of excess reserves that banks will seek to lend out. c. There are $100 million- excess reserves that banks will seek to lend out. OD. The banking system is in equilibrium. Show the T-account for the banking system in equilibrium. Banking System Assets Reserves +$1 billion +$10 billion Loans +$1 billion $10 billion Liabilities Discount loans Checkable deposits

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Banking System Liabilities 1 Billion Discont bains 51 ... View the full answer