Assets Liabilities Reserves: $30,000 Demand Deposits: $100,000 Loans: $70,000 Equity (net worth): $2,000 Property: $2,000 Assume the reserve requirement ratio is 20%. A. Calculate the dollar value of reserves that the Bank of America is required to hold. Show your work. B. Given the current reserves, calculate the maximum value of additional loans the Bank of America can make. Show your work. C. Assume that Elliot raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of America. By how much does the money supply immediately change as a result of Elliot's deposit?
| Assets | Liabilities |
| Reserves: $30,000 | |
| Loans: $70,000 | Equity (net worth): $2,000 |
| Property: $2,000 |
Assume the reserve requirement ratio is 20%.
A. Calculate the dollar value of reserves that the Bank of America is required to hold. Show your work.
B. Given the current reserves, calculate the maximum value of additional loans the Bank of America can make. Show your work.
C. Assume that Elliot raises $5,000 in cash from a yard sale and deposits the cash in his checking account at the Bank of America. By how much does the money supply immediately change as a result of Elliot's deposit?
D. Calculate the maximum change in demand deposits in the banking system as a whole resulting from Elliot's deposit. Show your work.
E. If the Bank of America is not meeting the reserve requirement, what action can it take to meet the reserve requirement without calling in loans or selling property?
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