Consider the following simplified balance sheet for a bank: a. If the required reserve ratio is 0.10,

Question:

Consider the following simplified balance sheet for a bank:

Liabilities Assets Reserves Loans $10,000 Deposits $70,000 $66,000 Stockholders' equity $6,000

a. If the required reserve ratio is 0.10, or 10 percent, how much in excess reserves does the bank hold?
b. What is the maximum amount by which the bank can expand its loans?
c. If the bank makes the loans in part (b), show the immediate effect on the bank's balance sheet.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...