The following table shows the balance sheet for the Senators' Bank,which has a target reserve ratio of 8 percent.
a)By how much is the Senators' Bank over- or under-reserved?
b)If the bank makes a loan in an amount equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan)to another customer of the bank who then deposits it,what will be the new amount of excess reserves?
c)If instead,the cheque written by the borrower is cleared against the Senators' Bank (the cheque was written to a customer of another bank),what will now be the amount of excess reserves?

Question

The following table shows the balance sheet for the Senators' Bank,which has a target reserve ratio of 8 percent.
  a)By how much is the Senators' Bank over- or under-reserved?
b)If the bank makes a loan in an amount equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan)to another customer of the bank who then deposits it,what will be the new amount of excess reserves?
c)If instead,the cheque written by the borrower is cleared against the Senators' Bank (the cheque was written to a customer of another bank),what will now be the amount of excess reserves?

Quizplus · Accepted Answer

The Answer of The following table shows the balance sheet for the Senators' Bank,which has a target reserve ratio of 8 percent.
  a)By how much is the Senators' Bank over- or under-reserved?
b)If the bank makes a loan in an amount equal to the excess reserves and the borrower writes a cheque (for the full amount of the loan)to another customer of the bank who then deposits it,what will be the new amount of excess reserves?
c)If instead,the cheque written by the borrower is cleared against the Senators' Bank (the cheque was written to a customer of another bank),what will now be the amount of excess reserves?

The Following Table Shows the Balance Sheet for the Senators