Suppose that the legal reserve ratio set by the Fed is 10% and that the Fair Bank in Fairdealing, Missouri, initially has checkable deposit equal to $240 and a reserve account of $70. A customer of Fair Bank deposits $100 into her checking account. Fair Bank loans 80% of the deposit and places the rest in its reserves at the St. Louis Fed. For simplicity, assume the borrower received the loan as cash. How much does Fair Bank have in excess reserves after the deposit and loan? Cash: Reserves: Loans: Property: Place the figures below to represent changes in the accounts of Fair Bank and the Federal Reserve of St. Louis' balance sheets resulting from the deposit and loan. +$100 +$80 Number $0 Balance Sheet: Fair Bank Liabilities: Net equity: +$20-$100 +$10-$80 -$20 -$10 Balance Sheet: Saint Louis Fed Liabilities: Cash: Property: Loans:

Suppose that the legal reserve ratio set by the Fed is 10% and that the Fair Bank in Fairdealing, Missouri, initially has checkable deposit equal to $240 and a reserve account of $70. A customer of Fair Bank deposits $100 into her checking account. Fair Bank loans 80% of the deposit and places the rest in its reserves at the St. Louis Fed. For simplicity, assume the borrower received the loan as cash. How much does Fair Bank have in excess reserves after the deposit and loan? Cash: Reserves: Loans: Property: Place the figures below to represent changes in the accounts of Fair Bank and the Federal Reserve of St. Louis' balance sheets resulting from the deposit and loan. +$100 +$80 Number $0 Balance Sheet: Fair Bank Liabilities: Net equity: +$20-$100 +$10-$80 -$20 -$10 Balance Sheet: Saint Louis Fed Liabilities: Cash: Property: Loans:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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