Consider a bank that has assets of 150, capital of 50 and demand deposits of 100. Remember

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Consider a bank that has assets of 150, capital of 50 and demand deposits of 100. Remember that deposits are liabilities of a bank.

(i)Set up the bank’s balance sheet. What is the leverage and capital ratio?

(ii) Now suppose that the value of a bank assets fall by 50. What is the new leverage and capital ratio?

(ii) Why might this worry an economist?

Related Book For answer-question

Macroeconomics

ISBN: 9781292160504

7th Global Edition

Authors: Olivier J. Blanchard

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Posted Date: Mar 03, 2024 05:03 AM

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Consider a bank that has assets of 150, capital of 50 and demand deposits of 100. Remember

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i Banks Balance Sheet and Ratios Assets 150 This includes loans cash investments etc Liabilities Demand Deposits 100 These are funds customers can wit... View the full answer

Macroeconomics

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