Question

Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 10 percent. Instructions: Refer to the balance sheet below. Enter your answers as whole numbers a. What is the amount of excess reserves in this commercial banking system? Answer is complete but not entirely correct. 40 billion What is the maximum amount the banking system might lend? Answer is complete but not entirely correct. 400 billion $ Show in columns 1(a) and 1'(a) how the consolidated balance sheet would look after this amount has been lent. What is the size of the monetary multiplier? Answer is complete and correct. 10 b. Using the original figures, answer the questions in part a assuming the reserve ratio is 5 percent. What is the amount of excess reserves in this commercial banking system? Answer is complete but not entirely correct 50 billion
Please help me complete the chart as well! thank you

Answer 1

Ans:

A). I). The amount of excess reserve in this commercial building systems=

Excess reserve= total reserve- required reserve

Required reserve= reserve ratio x checkable deposits

= 10% * 200 billions

= 20 billion

Excess reserve= 58 billion - 20 billion

= 38 billion

II). Maximum amount that banking system will lend = 1/ reserve ratio* excess reserve

=1/10%* 38 billion

= $380 billion

III). Money multiplier= 1/ reserve ratio

= 1/ 0.10

= 10

B).

I). The amount of excess reserve in this commercial building systems=

Excess reserve= total reserve- required reserve

Required reserve= reserve ratio x checkable deposits

= 5% * 200 billions

= 10 billion

Excess reserve= 58 billion - 10 billion

= 48 billion

II). Maximum amount that banking system will lend = 1/ reserve ratio* excess reserve

=1/10%* 48 billion

= $480 billion

III). Money multiplier= 1/ reserve ratio

= 1/ 0.05

= 20

The difference between the amount of lending is ($480 billion -380 billion)

= $100 billion

Chart:

Assets				Liabilities
Particulars	1	A).	B).	Particulars	1.	A).	B)
Reserves	58	56	45	Checkable deposits	200	580	680
Securities	42	42	42
Loans	100	380	480