2)

You are given this account for a bank:

ASSETS LIABILITIES

Reserves

$ 500 Deposits $ 3500

Loans

3000

The required reserve ratio is 10 percent.

c)By how much can the bank increase its loans?

d. Suppose a depositor comes to the bank and withdraws $400 in cash. Show the bank's new balance sheet, assuming the bank obtains the cash by drawing down its reserves. Does the bank now hold excess reserves? Is it meeting the required reserve ratio? If not, what can it do?