Question Two:

(1.5 points) Suppose that the Central Bank sets the reserve requirement at 14%. Study the effect of $ 35 million cash deposited into NPL Bank. However the banking sector chooses to hold $65 million in its vaults for its daily operations such as deposit withdrawals and loan requests. Study the effect of this transaction- taking into consideration the decision made by the banking sector- on the Consolidated Balance Sheet of the Banking system. Construct the Consolidated Balance Sheet of the Banking sector. (1.5 point)