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The bank you own has the following balance sheet Assets Reserves 60 million Loans 640 million Liabilities Deposit 500 bank Capital 200 a) Suppose that

The bank you own has the following balance sheet

Assets

Reserves 60 million

Loans 640 million

Liabilities

Deposit 500

bank Capital 200

a) Suppose that the bank suffers a deposit outflow of $25 million. Show the new balance sheet.

b) Suppose the bank responds to the reserve deficiency by selling some of its loans. Show the new balance sheet. Assume the reserve requirement ratio is 10%.

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