The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 5%. Liabilities/ Equity Demand deposits Shareholders' equity Assets Reserves Loans Securities Fixed assets Total $200 1,800 1,300 300 $3,600 $ (1) $ (2) Total $3,000 600 $3,600 $ (1) $ a. Fill in the blanks in columns (1) reflecting the complete effect of all excess reserves being loaned out. b. The maximum possible increase in the money supply is S c. Returning to the original balance sheet, if the target reserve ratio changes to 10%, the quantity of loans the system be forced to call in will be $ Write in the figures in columns (2) that show this process completed. (2)

The table below is the combined balance sheet for all the banks in a banking system. Each bank has a target reserve ratio of 5%. Liabilities/ Equity Demand deposits Shareholders' equity Assets Reserves Loans Securities Fixed assets Total $200 1,800 1,300 300 $3,600 $ (1) $ (2) Total $3,000 600 $3,600 $ (1) $ a. Fill in the blanks in columns (1) reflecting the complete effect of all excess reserves being loaned out. b. The maximum possible increase in the money supply is S c. Returning to the original balance sheet, if the target reserve ratio changes to 10%, the quantity of loans the system be forced to call in will be $ Write in the figures in columns (2) that show this process completed. (2)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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