In the following bank balance sheet, amounts are in millions of dollars. The required reserve ratio is 4% on the first $30 million of checkable deposits and 10% on any checkable deposits over $30 million. Assets Reserves Loans Securities Total Liabilities $32.7 Checkable deposits $150 Net worth $17.3 $200 Total $180.0 $20.0 $200 a. Calculate the bank's excess reserves. Excess reserves are $ 16.5 million. (Enter your response rounded to one decimal place.) b. Suppose that the bank sells $5 million in securities to get new cash. Show the bank's balance sheet after this transaction. (Enter your responses rounded to one decimal place.) Reserves Loans Securities Assets What are the bank's new excess reserves? Excess reserves are $21.5 million. (Enter your response rounded to one decimal place.) Liabilities $37.7 Checkable deposits $ 150 Net worth $12.3 $180 $20 c. Suppose that the bank loans all its excess reserves in part (b) to a local business. Show the bank's balance sheet after the loan has been made but before the business has spent the proceeds of the loan. (Enter your responses rounded to one decimal place.) Reserves Loans Securities Assets Now what are the bank's excess reserves? Excess reserves are $☐ million. (Enter your response rounded to one decimal place.) $37.7 Checkable deposits $171.5 Net worth $12.3 Liabilities $201.5 $20

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
Question

please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly

In the following bank balance sheet, amounts are in millions of dollars. The required reserve ratio is 4% on the first $30 million of checkable deposits and 10% on any checkable deposits over $30 million.
Assets
Reserves
Loans
Securities
Total
Liabilities
$32.7 Checkable deposits
$150 Net worth
$17.3
$200 Total
$180.0
$20.0
$200
a. Calculate the bank's excess reserves.
Excess reserves are $ 16.5 million. (Enter your response rounded to one decimal place.)
b. Suppose that the bank sells $5 million in securities to get new cash. Show the bank's balance sheet after this transaction. (Enter your responses rounded to one decimal place.)
Reserves
Loans
Securities
Assets
What are the bank's new excess reserves?
Excess reserves are $21.5 million. (Enter your response rounded to one decimal place.)
Liabilities
$37.7 Checkable deposits
$ 150 Net worth
$12.3
$180
$20
c. Suppose that the bank loans all its excess reserves in part (b) to a local business. Show the bank's balance sheet after the loan has been made but before the business has spent the proceeds of the loan. (Enter your responses
rounded to one decimal place.)
Reserves
Loans
Securities
Assets
Now what are the bank's excess reserves?
Excess reserves are $☐ million. (Enter your response rounded to one decimal place.)
$37.7 Checkable deposits
$171.5 Net worth
$12.3
Liabilities
$201.5
$20
Transcribed Image Text:In the following bank balance sheet, amounts are in millions of dollars. The required reserve ratio is 4% on the first $30 million of checkable deposits and 10% on any checkable deposits over $30 million. Assets Reserves Loans Securities Total Liabilities $32.7 Checkable deposits $150 Net worth $17.3 $200 Total $180.0 $20.0 $200 a. Calculate the bank's excess reserves. Excess reserves are $ 16.5 million. (Enter your response rounded to one decimal place.) b. Suppose that the bank sells $5 million in securities to get new cash. Show the bank's balance sheet after this transaction. (Enter your responses rounded to one decimal place.) Reserves Loans Securities Assets What are the bank's new excess reserves? Excess reserves are $21.5 million. (Enter your response rounded to one decimal place.) Liabilities $37.7 Checkable deposits $ 150 Net worth $12.3 $180 $20 c. Suppose that the bank loans all its excess reserves in part (b) to a local business. Show the bank's balance sheet after the loan has been made but before the business has spent the proceeds of the loan. (Enter your responses rounded to one decimal place.) Reserves Loans Securities Assets Now what are the bank's excess reserves? Excess reserves are $☐ million. (Enter your response rounded to one decimal place.) $37.7 Checkable deposits $171.5 Net worth $12.3 Liabilities $201.5 $20
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