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Connect /flow/connect.html https://newconnect.m Canas Home I MyNCTCHor LionPride Email Q Myldspal Pearson ConnectSIMnet. KeepITSIM 15 Saved Help Save & Exit Submi Check my work Suppose the simplified consolidated balance sheet shown below is for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 10 percent. Instructions: Refer to the balance sheet below. Enter your answers as whole numbers. a. What is the amount of excess reserves in this commercial banking system? billion What is the maximum amount the banking system might lend? Prey 14 of 151EE1 Next > · search

Explanation / Answer

a) reserve ratio is 10% which is of the checkable deposit in the bank that is $200 billion.

so the reserve required is 0.1*200 = $20 billion

but the reserve kept by the bank is $60 million.

therefore, the excess reserve is 60-20 = $40 billions.

b) The maximum the bank could lend is the total checkable deposits minus the required reserve , that is 200 -20 = $180 billions.

c) a) if the bank wuld have lend maximum the the balancesheet would have looked as followes

Liabilities column would have reserves = $ 20 billions and loans = $180 billions

Assets column would have Checkable deposits worth $ 200 billions

c) b) the new monetary multiplier would have been= 1/.1 =10 (answer)

d) if reserve requirement was 5 % then the required reserve would be .05 *200= $ 10 billions

which is $10 billion less than what would be supposed to be kept as reserve when reserve requirement was 10 %.

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