Question: I would much appreciate help with the following problem: Suppose Bank ABC, has $ 50,000 in reserves, $450,000 in loans lended to the public and
I would much appreciate help with the following problem:
Suppose Bank ABC, has $50,000 in reserves, $450,000 in loans lended to the public and $500,000 checking deposits. We assume that the Fed's required deposits is 10% and the public holds no cash.
Balance sheet (I think):
Assets Liabilities + Net worth
50,000 reserves 500,000 checking deposits
450,000 loans
If it sells $5000 in bonds, how would that affect the balance sheet, the Total deposits and Money supply? What would happen if someone forgot they had $5000 and deposit it in the bank?
Thank you very much!
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