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You have following information on the Bank of Morrisland: it currently holds a total of $150 million in checking account deposits and a total of $15 million in reserves. It has borrowed $35 million from the Federal Reserve and other sources. It has generated loans worth of $150 million and it holds treasury securities worth of $25 million and mortgage backed securities worth of $25 million. The required reserve ratio is 10 percent. What will the balance sheet look like? What problem will it create if customers decide to withdraw $10 million in deposits? List the things the bank can take to rectify this problem.

You have following information on the Bank of Morrisland: it currently holds a total of $150 million in checking account deposits and a total of $15 million in reserves. It has borrowed $35 million from the Federal Reserve and other sources. It has generated loans worth of $150 million and it holds treasury securities worth of $25 million and mortgage backed securities worth of $25 million. The required reserve ratio is 10 percent. What will the balance sheet look like? What problem will it create if customers decide to withdraw $10 million in deposits? List the things the bank can take to rectify this problem.

ECON MACRO
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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You have following information on the Bank of Morrisland: it currently holds a total of $150 million in checking account deposits and a total of $15 million in reserves. It has borrowed $35 million from the Federal Reserve and other sources. It has generated loans worth of $150 million and it holds treasury securities worth of $25 million and mortgage backed securities worth of $25 million. The required reserve ratio is 10 percent. What will the balance sheet look like? What problem will it create if customers decide to withdraw $10 million in deposits? List the things the bank can take to rectify this problem.
Transcribed Image Text:You have following information on the Bank of Morrisland: it currently holds a total of $150 million in checking account deposits and a total of $15 million in reserves. It has borrowed $35 million from the Federal Reserve and other sources. It has generated loans worth of $150 million and it holds treasury securities worth of $25 million and mortgage backed securities worth of $25 million. The required reserve ratio is 10 percent. What will the balance sheet look like? What problem will it create if customers decide to withdraw $10 million in deposits? List the things the bank can take to rectify this problem.
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