8. Critical analysis

Q17 Suppose that the reserve requirement is 10% and the following table shows the balance sheet of the Peoples National Bank.

Assets Liabilities

Vault Cash $10,000. Checking Deposits $100,000

Deposits at Fed $15,000 Net Worth $20,000

Securities $45,000

Loans $50,000

The required reserves of Peoples National Bank are $_______ , while the excess reserves are $ ______. Thus, if this bank wanted to extend a loan, the maximum amount for this additional loan would be $______ . Assuming the bank extends this loan, the total amount of loans in the banks balance sheet would be $______ .

Suppose the reserve requirement increases to 20%.

The bank would only be in a position to extend additional loans amounting to $_________ .