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A2-2. The Chinese central bank (PBOC) recently lowered its required reserve ratio for banks in China. If we assume that the initial balance sheet of the banking system is as shown below, and that everyone holds all their money in the banking system, and that the reserve ratio is decreased from 10% to 5%, both loans and the money supply will increase by 1000. Assets: Reserves Government Bonds Loans Outstanding Total Liabilities: 100 Deposits 1000 300 800 Capital 200 1200 Total 1200

A2-2. The Chinese central bank (PBOC) recently lowered its required reserve ratio for banks in China. If we assume that the initial balance sheet of the banking system is as shown below, and that everyone holds all their money in the banking system, and that the reserve ratio is decreased from 10% to 5%, both loans and the money supply will increase by 1000. Assets: Reserves Government Bonds Loans Outstanding Total Liabilities: 100 Deposits 1000 300 800 Capital 200 1200 Total 1200

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A2-2. The Chinese central bank (PBOC) recently lowered its required reserve ratio for banks in China. If we assume that the initial balance sheet of the banking system is as shown below, and that everyone holds all their money in the banking system, and that the reserve ratio is decreased from 10% to 5%, both loans and the money supply will increase by 1000.
Transcribed Image Text:A2-2. The Chinese central bank (PBOC) recently lowered its required reserve ratio for banks in China. If we assume that the initial balance sheet of the banking system is as shown below, and that everyone holds all their money in the banking system, and that the reserve ratio is decreased from 10% to 5%, both loans and the money supply will increase by 1000.
A2-2. The Chinese central bank (PBOC) recently lowered its required reserve ratio for banks in China. If we assume that the initial balance sheet of the banking system is as shown below, and that everyone holds all their money in the banking system, and that the reserve ratio is decreased from 10% to 5%, both loans and the money supply will increase by 1000. Assets: Liabilities: Reserves 100 Deposits 1000 Government Bonds 300 Loans Outstanding Total 800 Capital 200 1200 Total 1200
Transcribed Image Text:A2-2. The Chinese central bank (PBOC) recently lowered its required reserve ratio for banks in China. If we assume that the initial balance sheet of the banking system is as shown below, and that everyone holds all their money in the banking system, and that the reserve ratio is decreased from 10% to 5%, both loans and the money supply will increase by 1000. Assets: Liabilities: Reserves 100 Deposits 1000 Government Bonds 300 Loans Outstanding Total 800 Capital 200 1200 Total 1200
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