Suppose that the legal reserve ratio set by the Fed is10% and that the Fair Bank in
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Suppose that the legal reserve ratio set by the Fed is10% and that the Fair Bank in Fairdealing, Missouri initially has checkable deposit equal to$210 and a reserve account of$70.
A customer of Fair Bank deposits$100 into her checking account. Fair Bank loans80%of the deposit and places the rest in its reserves at the St. Louis Fed. For simplicity, assume the borrower received the loan ascash.
How much does Fair Bank have in excess reserves after the deposit andloan?
Place the figures to represent changes in the accounts of Fair Bank and the Federal Reserve of St. Louis' balance sheets resulting from the deposit andloan.
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