2) Calgary Finance Bank has the following balance sheet: Liabilities Chequable Deposits Capital Assets Reserves Loans $100 $1000 $1000 $100 Assume there is no excess reserve. One day Jack luckily finds a bill of $20 underneath his mattress and he deposits it into this bank. a) Describe how this deposit may affect Calgary Finance Bank's balance sheet. b) What willI be the excess reserve now? c) To keep reserve ratio at target level, what would this bank do? How would the action affect its balance sheet? d) if all commercial banks have the same target reserve ratio as this bank, and there is no cash drain, what will be the change in total deposits for the whole banking system after the process of money creation is completed?
2) Calgary Finance Bank has the following balance sheet: Liabilities Chequable Deposits Capital Assets Reserves Loans $100 $1000 $1000 $100 Assume there is no excess reserve. One day Jack luckily finds a bill of $20 underneath his mattress and he deposits it into this bank. a) Describe how this deposit may affect Calgary Finance Bank's balance sheet. b) What willI be the excess reserve now? c) To keep reserve ratio at target level, what would this bank do? How would the action affect its balance sheet? d) if all commercial banks have the same target reserve ratio as this bank, and there is no cash drain, what will be the change in total deposits for the whole banking system after the process of money creation is completed?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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