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Consider a bank with the following balance sheet: Assets: Reserves $100K and Loans $1 million. Liabilities: Checking Deposit $1 million. Net worth: $______ Assume $50K
Consider a bank with the following balance sheet: Assets: Reserves $100K and Loans $1 million. Liabilities: Checking Deposit $1 million. Net worth: $______
Assume $50K in deposits are suddenly withdrawn
i) Show how this affects the balance sheet (on both sides)
ii) Is the bank now in compliance with the minimum reserves discussed in (b)? If not, explain what the bank must do.
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