Question
A. Below is the balance sheet of a bank. The reserve requirement ison the firstof transaction accounts andon transaction accounts in excess of: Bank Balance
A. Below is the balance sheet of a bank. The reserve requirement ison the firstof transaction accounts andon transaction accounts in excess of:
Bank Balance Sheet
(amount in millions of dollars)
Assets Liabilities + Capital
Reserve 15.9 Transaction 180.0
Securities 34.1 Accounts
Loans 150.0 Capital 20.0
Total assets 200.0 Total liabilities 200.0
+ capital
1.Calculate the bank's excess reserves.
2.Suppose that the bank sellsin securities to get new cash. Draw up the bank's balance sheet after this transaction. What are the bank's excess reserves?
3.Suppose that the bank makes a loan to a customer of an amount equal to the amount of its excess reserves from part b. Draw up the bank's balance sheet before the customer spends the proceeds of the loan. What are the bank's excess reserves?
4.Now suppose that the customer spends the proceeds of the loan. Draw up the bank's balance sheet, and calculate its excess reserves.
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