Question
The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the banks target reserve ratio is
The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the banks target reserve ratio is 10%.
Assets | (1) | (2) | Liabilities / Equity | (1) | (2) | ||
Reserves | $120,000 | $ | $ | Demand deposits | $900,000 | $ | $ |
Loans | 680,000 | Shareholders equity | 500,000 | ||||
Securities | 250,000 | ||||||
Fixed assets | 350,000 | ||||||
Total | $1,400,000 | Total | $1,400,000 |
Reserves 120,000 for 1,2
Securities is 250,000 for 1,2
Fixed assets is 350,000 for 1,2
Shareholders equity is 500,000
a. This bank is (Click to select) over-reserved by $ _____ b. Suppose that a loan, in the amount of the excess reserves found in part (a), is made to Sats Mundin. Show the resulting balance sheet in columns (1) in the table above. c. Suppose that Sats immediately spends all of his loan by writing a cheque to his psychologist, Freda Freud. She deposits it in her account, which happens to also be at the Maple Leafs Bank. The bank is now (Click to select) over-reserved by $ ____ d. Suppose, instead, that the bank makes a loan for the amount in your answer in part (a), which then clears against the Maple Leafs Bank. Show the resulting balance sheet in columns (2) in the table above. e. The Bank now has excess reserves of $ ___ |
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