This Christmas, you decide to buy your true love a partridge in a pear tree. Aft

Question

This Christmas, you decide to buy your true love a partridge in a pear tree. After consulting with several garden centers, you make your purchase by writing a check for $150. The garden center promptly deposits your check in its bank.

A-Using T-account, show the effect of this transaction on your bank and on the garden center's bank(after your check is processed and cleared by the federal reserve).

B-What happens yo your bank's reserves?To the reserves of the garden center's bank?

C-Assuming the reserve requirement is 10% and your bank is not holding excess reservers, what is the level of excess reserves in your bank after the transaction?

D-List four possible methods your bank can use to remedy its reserve deficiency.

Explanation / Answer

Refer to Money banking and financial markets By Lloyd Brewster Thomas  

Part 3 Chapter 9-Commercial Banking for solution.

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