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. a. Calculate the bank's excess reserves. Reserves Loans Securities Total Assets Liabilities $32.7 Checkable deposits $150 Net worth $17.3 $200 Total $180.0 $20.0 $200 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.) Assets Reserves Loans Securities What are the bank's new excess reserves? Liabilities $ 37.7 Checkable deposits $150 Net worth $ 12.3 $ 180 $ 20 Excess reserves are $ 21.5 million. (Enter your response rounded to one decimal place.) 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 Liabilities Checkable deposits Net worth

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
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Chapter14: Banking And The Money Supply
Section: Chapter Questions
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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.
a. Calculate the bank's excess reserves.
Reserves
Loans
Securities
Total
Assets
Liabilities
$32.7 Checkable deposits
$150 Net worth
$17.3
$200 Total
$180.0
$20.0
$200
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.)
Assets
Reserves
Loans
Securities
What are the bank's new excess reserves?
Liabilities
$ 37.7 Checkable deposits
$150 Net worth
$ 12.3
$ 180
$ 20
Excess reserves are $ 21.5 million. (Enter your response rounded to one decimal place.)
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
Liabilities
Checkable deposits
Net worth
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. a. Calculate the bank's excess reserves. Reserves Loans Securities Total Assets Liabilities $32.7 Checkable deposits $150 Net worth $17.3 $200 Total $180.0 $20.0 $200 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.) Assets Reserves Loans Securities What are the bank's new excess reserves? Liabilities $ 37.7 Checkable deposits $150 Net worth $ 12.3 $ 180 $ 20 Excess reserves are $ 21.5 million. (Enter your response rounded to one decimal place.) 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 Liabilities Checkable deposits Net worth
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