GME Bank has hired you to manage the bank's loans. Currently they have $400,000 in checking deposits and the bank plans to keep at least 10% in reserves. Use the bank balance sheet to answer the questions below. Reserves Loans Assets 110,000 290,000 GME Bank Liabilities and Net Worth Checkable deposits 400,000 1. If customers withdraw $40,000 in checking deposits, how much will banks have left in reserves 2. After the withdraw from part 1, how much will the bank be willing to make in new loans? 3. What happens to the total assets of the bank if the liabilities increase by $50,000?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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GME Bank has hired you to manage the bank's loans. Currently they have $400,000 in checking
deposits and the bank plans to keep at least 10% in reserves. Use the bank balance sheet to answer
the questions below.
Reserves
Loans
Assets
110,000
290,000
GME Bank
Liabilities and Net Worth
Checkable deposits
400,000
1. If customers withdraw $40,000 in checking deposits, how much will banks have left in reserves
2. After the withdraw from part 1, how much will the bank be willing to make in new loans?
3. What happens to the total assets of the bank if the liabilities increase by $50,000?
Transcribed Image Text:GME Bank has hired you to manage the bank's loans. Currently they have $400,000 in checking deposits and the bank plans to keep at least 10% in reserves. Use the bank balance sheet to answer the questions below. Reserves Loans Assets 110,000 290,000 GME Bank Liabilities and Net Worth Checkable deposits 400,000 1. If customers withdraw $40,000 in checking deposits, how much will banks have left in reserves 2. After the withdraw from part 1, how much will the bank be willing to make in new loans? 3. What happens to the total assets of the bank if the liabilities increase by $50,000?
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