The balance sheet below shows the effect of a new 2,400 deposit in Bank A. Assume that the commercial banks have established a 16 percent desired reserve and that no bank holds excess reserves. Assets Reserves 2,400 Loans 0 BANK A Liabilities Deposits 2,400 Assume that Bank A lends its excess reserves to Mr. Jones who spends the proceeds of the loan. Show Bank A's new balance sheet BANK A Assets Liabilities Reserves Number Deposits Number Loans Number The money Mr. Jones borrows is deposited in Bank B. Bank B lends its excess reserves to Mr. Smith. Show Bank B's balance sheet after the loan has been made out. Assets BANK B Liabilities Reserves Number Deposits Number Loans Number The money Mr. Smith borrows is deposited in Bank C. Bank C lends its excess reserves to Mr. Black. Show Bank C's balance sheet after the loan has been made out. Assets BANK C Liabilities Reserves Number Deposits Number Loans Number The money Mr. Black borrows is deposited in Bank D. Bank D lends its excess reserves to Mr. Green. Show Bank D's balance sheet after the loan has been made out. BANK D Assets Liabilities Reserves Number Deposits Number Loans Number If the above process continues to completion, the following totals will exist for the banking system: Part 7: Deposits Number Part 8. Reserves Number

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