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The following balance sheet is an abridge version of Scotia Banks balance sheet. Assets Liabilities Cash (reserves) 200 Deposits 900 Loans 700 1. [2 points]
The following balance sheet is an abridge version of Scotia Banks balance sheet. Assets Liabilities Cash (reserves) 200 Deposits 900 Loans 700 1. [2 points] What is the reserve ratio of Scotia Bank? 2. [2 points] Christmas is approaching fast, and Scotia bank knows it is a period of high currency demand. If it anticipates that its depositors will increase their demand for money from 10 to 20%, given its current balance sheet, will they need to borrow from the Bank of Canada to increase their liquidity? How much excess liquidity (reserves) do they have? 3. [2 points] If the bank had a desired reserve ratio of 10%. What would be the value of the loans it could do after 1 round of loans? (Hint: I'm asking for additional loans from the 700 which it already has if people don't redeposit the new loans back in the bank) 4. [4 points] Fractional-reserve banking is when banks hold more deposits than reserve (cash), while this is risky and must be regulated, what does its users gain from such banking system? (Show me what You know within an economic context and what this means to you - as someone who will one day ask for a loan to purchase a home)
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