The Bank has the following balance sheet (in millions of dollars)
Assets Liabilities
______________________________________…
Cash (reserves) $4,000 Deposits $100,000
Deposited at the Fed $5,000
Loans $91,000
______________________________________…
Total $100,000 $100,000
The required reserve ratio on all deposits is 5%
a. What, if any, are the bank's excess reserves?
b. How much amount will this bank be able to loan out?
c. If there is no currency drain and all funds loaned out by this bank are deposited back in this bank, what are the bank's excess reserves, if any, after the new deposit has been made?
d. Answer part a, b, and c if the required reserve ratio is increased to 8%.
Even just one part would be helpful. My prof wrote the textbook and it doesnt give any examples at all!! I'm so confused...
Assets Liabilities
______________________________________…
Cash (reserves) $4,000 Deposits $100,000
Deposited at the Fed $5,000
Loans $91,000
______________________________________…
Total $100,000 $100,000
The required reserve ratio on all deposits is 5%
a. What, if any, are the bank's excess reserves?
b. How much amount will this bank be able to loan out?
c. If there is no currency drain and all funds loaned out by this bank are deposited back in this bank, what are the bank's excess reserves, if any, after the new deposit has been made?
d. Answer part a, b, and c if the required reserve ratio is increased to 8%.
Even just one part would be helpful. My prof wrote the textbook and it doesnt give any examples at all!! I'm so confused...