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Consider the following simple balance sheet. Assuming a required reserve ratio of 10%, determine the required and excess reserves this bank is holding. In general

Consider the following simple balance sheet.

Assuming a required reserve ratio of 10%, determine the required and excess reserves this bank is holding. In general terms, explain what reserves are and why they are necessary. (6 marks)

Assets	$m	Liabilities	$m
Reserves	45	Deposits	300
Loans	250	Capital	20
Securities	25

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