### Educational Resource: Understanding Bank Reserves and Balance Sheets#### Table: Initial Balance Sheet for Mega Bank| **Assets** | **Liabilities** ||---------------|-----------------|| Reserves: $30 | Deposits: $1,000|| Loans: $970 | Total: $1,000 || Total: $1,000 | |### Scenario AnalysisBarney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, MegaBank will have excess reserves of:**Options:**1. $48.502. $50.003. $15.004. $33.00### Explanation of the Table and ScenarioThe table provided illustrates Mega Bank's initial balance sheet. It lists the assets and liabilities, each totaling $1,000.**Assets**: - **Reserves**: $30- **Loans**: $970- **Total Assets**: $1,000**Liabilities**:- **Deposits**: $1,000- **Total Liabilities**: $1,000**Scenario Explanation**:When Barney deposits $50, the total deposits will increase to $1,050. The reserve requirement is 3%, so to find the required reserves:\[\text{Required Reserves} = 3\% \times \text{Total Deposits} = 0.03 \times 1,050 = $31.50\]Mega Bank initially had $30 in reserves. Adding Barney's deposit, the new reserves amount will be:\[\text{New Reserves} = $30 + $50 = $80\]To calculate the excess reserves, we subtract the required reserves from the new reserves:\[\text{Excess Reserves} = \text{New Reserves} - \text{Required Reserves} = $80 - $31.50 = $48.50\]Therefore, the correct answer is:- **$48.50**This example demonstrates how deposits affect a bank's balance sheet and reserve requirements, illustrating key principles in banking and financial regulation.

Here, the given balance sheet shows the required reserves, loans, and deposits in the balance sheet…

Assets Liabilities Reserves Deposits $1,000 Loans $970 Total $1,000 Total $1,000 The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, MegaBank will have excess reserves of O $48.50 O $50.00 O $15.00 O $33.00 $30

Assets Liabilities Reserves Deposits $1,000 Loans $970 Total $1,000 Total $1,000 The above table gives the initial balance sheet for Mega Bank. Barney comes into the bank and deposits $50 of currency into his checking account. The desired reserve ratio is 3 percent. After Barney's deposit, but before any other actions occur, MegaBank will have excess reserves of O $48.50 O $50.00 O $15.00 O $33.00 $30

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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