Unit 4 - Financial Sector Bank Balance Sheets After you watch the video assigned on AP Classroom, see what you can do with bank balance sheets! In the example on the video, she kept it pretty simple, but there is a little bit of a refresher below! You can also find this information on Slides 13 - 15 of the unit 4 notes on Google Classroom. Bank balance sheets report the assets, liabilities, and bank capital for an individual bank. The balance sheet identity is: . Assets = Liabilities + Capital The assets are items that the bank owns. This includes loans, securities, and reserves. Liabilities are items that the bank OWeS to someone else, including deposits and bank borrowing from other institutions. I ' Capital is sometimes referred to as \"net worth\Unit 4 ~ Financial Sector Bank Balance Sheets 0. If the bank sells bonds (same thing as securities!) in the amount of $2,000 to the FED for cash; what would be the change in value for each of thefollowing? i. Required Reserves ' ii. Excess Reserves iii. Securities d. What can the bank do with any excess reserves? How does this impact the economy? 2. Fill in your own balance sheet belowl Assume the following: All Banks are required to hold $1 in reserves for every $10 of deposits in this economy. All accounts were previously equal to O (or that we are only looking at changes), and that there i 'are an infinite number of banks in this economy. W 2m CW mm ASSETS ' ' LIABILITIES . a. Suhan has $3000 cash in hand. Suppose that he deposits all of this in the Student Run Credit Union. Fill the following table for Student Run Credit Union above immediately after Suhan has made his deposit. Be sure to label all entries. And make sure they are balanced! b. Suppose the Student Run Credit Union would like to make the largest loan they can at this time. I i. How much will the loan be? ii. Show this change on the balance sheet. Complete this Quizzizz for practice! I will be able to see your results so use your actual name: httpszquizizz.com/join?gc=01345065 Put additional questions in this Google form (this is optional): bgs://docs.googlecom/torms/d/eli FApoLScFAchx7gmeBFF4JdchngBO40RngXplSBF E4QERcCi5w/viewform?usp=3f link .5 Unit 4 Financial Sector Bank Balance Sheets & the Money Multiplier What is the formula for the money multiplier? Use the Bank Balance Sheets below to demonstrate the fractional reserve banking system and money expansion. ' A. Suppose that Powell Bank makes the largest possible loan they can to Vansh. Vansh uses this loan for video games at Target. Target deposits all of the payment into Yellen Bank. Fill in the tables below immediately after Target deposited their funds, be sure to label appropriately. ' Powell Bank ' Liabilities Required Reserves $300 Demand Deposits ' $3000 Yellen Bank B. Suppose that Yellen Bank lends all of their excess reserves to Pranvi. Pranvi uses the loan to buy books for school at Barnes and Noble. Barnes and Noble deposits all of the payment into Bernanke Bank. Fill in the tables below immediately after Barnes and Noble deposited their funds, be sure to label appropriately. ~ Yellen Bank 0 ' Liabilities V \" . Liabilities Bernanke Bank Assets ' . H\" Unit 4 - Financial Sector Bank Balance Sheets & the Money Multiplier C. Suppose this lending cycle continues many times (innity). Fill in the following table for All Banks Combined. (Assuming there are no currency drains.) ' Show any work: ' Combined Bank Balance Sheet Liabilities ' Assume the required reserve ratio is 30 percent. All figures are in millions of dollars. Combined Bank Balance Sheet ' . ' - A. What is the amount of excess reserves in this banking system? Show your work. " B. What is the maximum amount the money supply can be expanded based on the ' information from part A? Show your work. , C. If the reserve ratio fell to 25 percent, what is now the maximum amount that the money supply can be expanded? Show your work. I ' Suppose the reserve ratio in an economy is 20%. Ashwin deposits $10,000 of currency into the bank. A. What is the initial change in the M1 money supply? B. What is the new value of excess reserves? _ . _ .1 C. How much can the money supply change based off of Danny Ashwin's deposit