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Chapter 26 In-Class Exercise 1. The following T-account shows the assets and liabilities of all banks in Canada. The reserve
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Answer #1

a.

(Figures are in million dollar)

Desired reserve = Deposits × Required reserve ratio

                        = 1,000 × 10%

                        = 100 (Answer)

Excess reserve = Actual reserve – Desired reserve

                        = 200 – 100

                        = 100 (Answer)

b.

T-account (figures are in million)

Assets

Liabilities

Actual reserve (desired)              $100

Deposit                                   $1,000

Loan                                             $800

Bonds                                          $100

c.

Change in loans = Additional loan / required reserve ratio

                        = $100 million / 0.10

                        = $1,000 million (Answer)

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