Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank.The local currency is the dia.Namdian banks collectively hold 100 million dias of required reserves,25 million dias of excess reserves,250 million dias of Namdian Treasury Bonds,and their customers hold 1,000 million dias of deposits.Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1.Assuming the only other item Namdian banks have on their balance sheets is loans,what is the value of existing loans made by Namdian banks?
A)625 million dias
B)875 million dias
C)1,125 million dias
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The total assets of the banks must equal the total liabilities. The deposits are liabilities (1,000 million dias), and the assets are reserves (100 million required + 25 million excess = 125 million dias), Treasury Bonds (250 million dias), and loans. Therefore, loans = deposits - (reserves + Treasury Bonds) = 1,000 - (125 + 250) = 625 million dias.

Scenario 29-1. The Monetary Policy of Namdian Is Determined by the Namdian