You live in a world with a universal 8.5% required reserve rate for all depository institutions. Assume the police take the $300,000 found in Whitey Bolger’s walls and deposits the cash back in the banking system (an example of forced “dishoarding”). 

A) What will the change in the bank’s T-account look like immediately after the deposit? 

B) Assuming the bank wants no excess reserves, what would its T-account look like after it loans out the excess reserves from the first $300,000 deposit? 

C) What would be the ending T-account if no bank held excess reserves (following the $300,000 deposit)?

Answer rating: 100% (QA)

A 300000 cash is deposited in bank so this means cash is increased and deposit will also increase B ... View the full answer