1 answer

Regarding commercial banking balance sheets. First, use a T-account to show how a $100 deposit affects...

Question:

Regarding commercial banking balance sheets. First, use a T-account to show how a $100 deposit affects the balance sheet. Separate the funds into required reserves and excess reserves using a required reserve ratio of 0.1. Second, demonstrate what happens to the balance sheet when the bank loans out all of the excess reserves. Third, demonstrate what happens to the balance sheet after loaned funds are deposited in a different bank.

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Answers

1.) Required Reserves = 100*0.1 = 10 and Excess Reserves shall be the remaining 90

Liabilities Amount Assets Amount Share Capital Reserve Fund Cash 90 Balances with the Central Bank and other banks. 10 Deposi

2.)

Liabilities Amount Assets Amount Share Capital Cash 90 Reserve Fund Balances with the Central Bank and other banks. 10 190 Mo3.)

Now the amount shall move from cash to other bank and deposits shall diminish.

Liabilities Assets Amount Amount Share Capital Reserve Fund Cash Balances with the Central Bank and other banks. 10 Deposits

All the Best.

.

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