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The balance sheet below shows the effect of a new 2,000 deposit in Bank A. Assume that the commercial banks have established a 13 percent
The balance sheet below shows the effect of a new 2,000 deposit in Bank A. Assume that the commercial banks have established a 13 percent desired reserve and that no bank holds excess reserves. Assets Reserves 2,000 Loans 0 BANK A Liabilities Deposits 2,000 Assume that Bank A lends its excess reserves to Mr. Jones who spends the proceeds of the loan. Show Bank A's new balance sheet Assets Reserves Number Loans Number BANKA Liabilities Deposits Number The money Mr. Jones borrows is deposited in Bank B. Bank Blends its excess reserves to Mr. Smith. Show Bank B's balance sheet after the loan has been made out. Assets Reserves Number Loans Number BANK B Liabilities Deposits Number The money Mr. Smith barrows is deposited in Bank C. Bank Clends its excess reserves to Mr. Black. Show Bank C's balance sheet after the loan has been made out. Assets Reserves Number Loans Number BANK C Liabilities Deposits Number The money Mr. Black barrows is deposited in Bank D. Bank D lends its excess reserves to Mr. Green. Show Bank D's balance sheet after the loan has been made out. Assets Reserves Number Loans Number BANK D Liabilities Deposits Number If the above process continues to completion, the following totals will exist for the banking system: Part 7: Deposits Number Part 8: Reserves Number Part 9: Loans Number
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