Question
I only need the answer to c below. 2. Refer to the simplified balance sheet for a bank and answer the following questions. Assets Liabilities
I only need the answer to "c" below.
2. Refer to the simplified balance sheet for a bank and answer the following questions.
| Assets | Liabilities | ||
|---|---|---|---|
| Reserves | $10,000 | Deposits | $70,000 |
| Loans | $66,000 | Stockholder's equity | $6,000 |
- If the required reserve ratio is 5%, how much in excess reserves does this bank hold? Show your work.
- The Formula for the Reserve Ratio is:
Reserve requirement = Deposits * Reserve Ratio (What Is the Reserve Ratio, and How Is It Calculated?, 2022)
Reserve requirement = 70,000 * 5%
= $3500
- What is the maximum amount this bank can expand on its loans? Show your work.
Maximum loan expansion = (deposits - loans) - reserve requirement
= (70000 - 66000) - 3500
= 4000-3500
= 500
- What will happen to the M1 money supply if it makes the loans under (b) above and those funds are deposited into another bank by the borrowers?
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Statistics Informed Decisions Using Data
Authors: Michael Sullivan III
5th Edition
9780134133539
