Question

Assets Reserves Loans Liabilities $3,000 Deposits $450 $2,550 The required reserve ratio is 12 percent. Given its deposits of $3,000, the bank is required to hold $ 360 as reserves. (Enter your response as an integer.) The bank holds excess reserves of $ 90. (Enter your response as an integer.) The bank can increase its loans by $ 750 . (Round your response to two decimal places.) Suppose a depositor comes to the bank and withdraws $200 in cash. Show the bank's new balance sheet, assuming the bank obtains the cash by drawing down its reserves (Enter your responses as integers.) Assets Liabilities Reserves $ 250 $ 2800 Deposits Assets Reserves $2560 Loans Loans The bank must borrow reserves a can lend reserves must borrow reserves is exactly meeting the reserve requirement

Answer 1

Answer:

1]

As required reserve ratio = 12% and Deposits = $3000

So, Reserve amount to be hold = 12% of Deposits = 12/100 * $3000 = $360

2]

Given reserves =450;
required reserves = 360;
so excess reserves = 450-360 = 90

The bank holds excess reserves of $90

3]

The bank can increase its loans by $90

4]

Now, If a depositor comes and withdraws $200 from the bank then the deposits fall by $200

So, Deposit = $3000 - $200 = $2800

Now, As we know in a balance sheet, Asset = Liability

So, Liability = Deposit = $2800 and Asset = Reserves + Loans = Reserves + $2550

So, $2800 = Reserves + $2550

So, Reserves = $2800 - $2550 = $250

Hence , Banks new balance sheet is as follows :-

ASSETS	LIABILITIES
Reserves $ 250	$ 2800 Deposits
Loans $2550

The bank must borrow reserves