The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio is 10%. Assets Reserves Loans Securities Fixed assets Total $120,000 $ 680,000 250,000 350,000 $1,400,000 (1) 90,000 $ 710,000 250,000 350,000 1,430,000 (2) Liabilities/ Equity Demand deposits Shareholders' equity Total $900,000 $ 500,000 $1,400,000 a. This bank is over-reserved by $30,000 b. Suppose that a loan, in the amount of the excess reserves found in part (a), is made to Sats Mundin. Show the resulting balance sheet in columns (1) in the table above. c. Suppose that Sats immediately spends all of his loan by writing a cheque to his psychologist, Freda Freud. She deposits it in her account, which happens to also be at the Maple Leafs Bank. The bank is now over-reserved by $30,000 (1) $ (2)

The table below is the current balance sheet for the Maple Leafs Bank. Answer the following questions assuming that the bank's target reserve ratio is 10%. Assets Reserves Loans Securities Fixed assets Total $120,000 $ 680,000 250,000 350,000 $1,400,000 (1) 90,000 $ 710,000 250,000 350,000 1,430,000 (2) Liabilities/ Equity Demand deposits Shareholders' equity Total $900,000 $ 500,000 $1,400,000 a. This bank is over-reserved by $30,000 b. Suppose that a loan, in the amount of the excess reserves found in part (a), is made to Sats Mundin. Show the resulting balance sheet in columns (1) in the table above. c. Suppose that Sats immediately spends all of his loan by writing a cheque to his psychologist, Freda Freud. She deposits it in her account, which happens to also be at the Maple Leafs Bank. The bank is now over-reserved by $30,000 (1) $ (2)

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 4.8P

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