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The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio
The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio is 10%. Assets Reserves Loans Securities Fixed assets Total a. This bank is over-reserved (1) (2) Liabilities Equity $120,000 680,000 $ $ Demand deposits Shareholders' equity 250,000 350,000 $1,400,000 by $30000 Total (1) (2) $900,000 500,000 $ $ $1,400,000 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 over-reserved by $30000 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 $ Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented in the table below. Assume that each of the other banks also has a target reserve ratio of 10%. Assets Reserves Loans Securities Fixed assets Total $1,200,000 6,800,000 (1 all) $ 2,500,000 3,500,000 $14,000,000 Liabilities Equity Demand deposits Shareholders' equity Total (1 all) $9,000,000 5,000,000 $ $14,000,000 f. In the table above, show the balance sheet of this banking system when it is fully loaned up. Use columns (1 all). g. The increase in the money supply as a result of all the banks becoming fully loaned up is $
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