BALANCE SHEET OF BANK A (S IN MILLIONS) ASSETS LIABILITIES and NET WORTH Reserves (Cash/Reserves at Fed) 550 Demand Deposits $100 Lonns 20 Govt. Securities 90 Net Worth (Owners' Equity) J. What is the net worth of this bank? 2. If the required reserve is 10%, what is the amount of REQUIRED RESERVES that this bank must hold7 3. What then is the amount of EXCESS RESERVES that this bank is now holding?

BALANCE SHEET OF BANK A (S IN MILLIONS) ASSETS LIABILITIES and NET WORTH Reserves (Cash/Reserves at Fed) 550 Demand Deposits $100 Lonns 20 Govt. Securities 90 Net Worth (Owners' Equity) J. What is the net worth of this bank? 2. If the required reserve is 10%, what is the amount of REQUIRED RESERVES that this bank must hold7 3. What then is the amount of EXCESS RESERVES that this bank is now holding?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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Humongous Bank is the only bank in the economy. The people in this economy have 20 million in money, and they deposit all their money in Humongous Bank. Humongous Bank decides on a policy of holding 100 reserves. Draw a T-account for the bank. Humongous Bank is required to hold 5 of its existing 20 million as reserves, and to loan out the rest. Draw a T-account for the bank after it has made its first round of loans. Assume that Humongous bank is part of a multibank system. How much will money supply increase with that original 19 million loan?
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