Question

The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank’s target reserve ratio is 10%.

Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented in the table below. Assume that each of the other banks also has a target reserve ratio of 10%.

I need help with the empty boxes in both questions. Thank You  

Check my wo Assets (1) 120000 (2) Liabilities / Equity (1) Reserves (2) $120,000 Demand deposits $900,000 Loans 710000 680,000 Shareholders' equity 500000 Securities 500,000 50 250000 250,000 250000 Fixed assets 350000 350,000 350000 Total $1,400,000 1430000 Total $1,400,000 a. This bank is over-reserved by $ 30000 b. Suppose that a loan, in the amount of the excess reserves found in part (a), is made to Sats Mundin. Show the resulting balance sheet in columns (1) in the table above. c. Suppose that Sats immediately spends all of his loan by writing a cheque to his psychologist, Freda Freud. She deposits it in her account, which happens to also be at the Maple Leafs Bank. The bank is now over-reserved by $ d. Suppose, instead, that the bank makes a loan for the amount in your answer in part (a), which then clears against the Maple Leafs Bank. Show the resulting balance sheet in columns (2) in the table above. e. The Bank now has excess reserves of $ Suppose that there are a total of 9 other banks in the economy and that the balance sheet for the whole banking system is presented in the table below. Assume that each of the other banks also has a target reserve ratio of 10%. Assets (1 all) 1200000 Liabilities/ Equity Reserves (1 all) $1,200,000 Demand deposits Shareholders equity $9,000, 000 Loans 6,800,000 5000000 5,000, 000 Securities 2,500,000 2500000 3500000 Fixed assets 3,500,000 Total $14,000,000 Total $14,000,000 f. In the table above, show the balance sheet of this banking system when it is fully loaned up. Use columns (1 all). g. The increase in the money supply as a result of all the banks becoming fully loaned up is $ h. Returning to the original balance sheet. What would be the reserve ratio on all banks? economy's central bank imposing a 20% required of The Banking system would be (Click to select) and $ by $ worth of loans would have to be called in.

Answer 1

a) The bank is over-reserved by 30000 dollar.(As 120000-900000*10%)=30000.

b)if the amount 30000 is made as a loan then column 1 (asset)becomes 680000+30000=710000

c)if the amount is deposited again then the bank is over-reserved by 30000 dollar,

d)if the amount is given as a loan then in column (2) (asset )will show 30000 dollar in the loan section.

e)so in the changed situation bank will have amount of excess reserve 0.

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