Beleaguered State Bank (BSB) holds $500 million in deposits and maintains a reserve ratio of 20 percent. Complete the following T-account for BSB. Beleaguered State Bank Assets Liabilities Reserves million Deposits million Loans million Now suppose that BSB's largest depositor withdraws $25 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding. Complete BSB's new T-account after it has taken this action. Beleaguered State Bank Assets Liabilities Reserves million Deposits million Loans million Because BSB is cutting back on its loans, other banks will find they have reserves, causing them to their loans. BSB may find it difficult to cut back on its loans immediately because it cannot force people to pay off loans. Which of the following ways represent an alternative for BSB to return to its original reserve ratio? Check all that apply. Borrow money from another bank Attract additional deposits Borrow money from the Fed Lend money
Beleaguered State Bank (BSB) holds $500 million in deposits and maintains a reserve ratio of 20 percent. Complete the following T-account for BSB. Beleaguered State Bank Assets Liabilities Reserves million Deposits million Loans million Now suppose that BSB's largest depositor withdraws $25 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding. Complete BSB's new T-account after it has taken this action. Beleaguered State Bank Assets Liabilities Reserves million Deposits million Loans million Because BSB is cutting back on its loans, other banks will find they have reserves, causing them to their loans. BSB may find it difficult to cut back on its loans immediately because it cannot force people to pay off loans. Which of the following ways represent an alternative for BSB to return to its original reserve ratio? Check all that apply. Borrow money from another bank Attract additional deposits Borrow money from the Fed Lend money
Chapter25: Money Creation
Section: Chapter Questions
Problem 8SQP
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Beleaguered State Bank (BSB) holds $500 million in deposits and maintains a reserve ratio of 20 percent.
Complete the following T-account for BSB.
| Beleaguered State Bank | |||
| Assets | Liabilities | ||
| Reserves |
|
Deposits |
|
| Loans |
|
Now suppose that BSB's largest depositor withdraws $25 million in cash from her account. BSB decides to restore its reserve ratio by reducing the amount of loans outstanding.
Complete BSB's new T-account after it has taken this action.
| Beleaguered State Bank | |||
| Assets | Liabilities | ||
| Reserves |
|
Deposits |
|
| Loans |
|
Because BSB is cutting back on its loans, other banks will find they have reserves, causing them to their loans.
BSB may find it difficult to cut back on its loans immediately because it cannot force people to pay off loans.
Which of the following ways represent an alternative for BSB to return to its original reserve ratio? Check all that apply.
Borrow money from another bank
Attract additional deposits
Borrow money from the Fed
Lend money
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