. Nodaway Valley Bank receives a $5,000 deposit. Assume that banking regulations require banks to hold...
. Nodaway Valley Bank receives a $5,000 deposit. Assume that banking regulations require banks to hold 10% of their checkable deposits as reserves. Nodaway Valley Bank chooses not to hold excess reserves buy to make loans instead. Construct a T-account to illustrate the change in Nodaway Valley Bank’s balance sheet.
Homework Answers
Deposits Amount = $5000
Reserve on Checkable Deposits = 10%
Checkable Deposits Reserve = $5000*10% = $500
As, Bank does not hold excess reserve buy to make loans instead. Loan made = Deposits - Reserve
= $ 5000 - $500 = $4500
Illustrating the Change in Nodaway valley bank's balance Sheet of following transactions:
| Assets | Amount in $ | Liabilities | Amount in $ |
| Reserves | +500 | Deposits | +5000 |
| Loans | +4500 | ||
| Total | +5000 | Total | +5000 |
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Question 1 options:
the amount of its checkable deposits.
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