Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Beleaguered State Bank (BSB) holds $400 million in deposits and maintains a reserve ratio of 10 percent. Complete the following T-account for BSB. Beleaguered State

Beleaguered State Bank (BSB) holds $400 million in deposits and maintains a reserve ratio of 10 percent.

Complete the following T-account for BSB.

Beleaguered State Bank
Assets Liabilities
Reserves ___________ million Deposits ___________ million
Loans ___________million

Now suppose that BSB's largest depositor withdraws $20 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding.

Complete BSB's new T-account after it has taken this action.

Beleaguered State Bank
Assets Liabilities
Reserves___________million Deposits _____________million
Loans_____________ million

Because BSB is cutting back on its loans, other banks will find they have excess or insufficient? reserves, causing them to Increase or Decrease ? their loans.

BSB may find it difficult to cut back on its loans immediately because it cannot force people to pay off loans.

Which of the following ways represent an alternative for BSB to return to its original reserve ratio? Check all that apply.

Attract additional deposits

Borrow money from another bank

Lend money

Borrow money from the Fed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Environmental Audits

Authors: Cliff VanGuilder

1st Edition

1938549600, 978-1938549601

More Books

Students also viewed these Accounting questions