Balance Sheet 28-2 A bank\'s assets consist of $1,000,000 in total reserves, $2,

Question

Balance Sheet 28-2
A bank's assets consist of $1,000,000 in total reserves, $2,100,000in loans, and a building worth
$1,200,000. Its liabilities and capital consist of $3,000,000 indemand deposits and $1,300,000 in capital.

1. Refer to Balance Sheet 28-2. If the required reserve ratio is 10percent, what is the level of the bank's
excess reserves? How much could it loan out as a result?
a. $700,000; $700,000
b. $700,000; $7,000,000
c. $300,000; $300,000
d. $300,000; $3,000,000

2. Refer to Balance Sheet 28-2. If the required reserve ratio is 10percent, what is the level of the bank's
excess reserves? How much money could the excess reserves be usedto create in the banking system as a result?
a. $700,000; $700,000
b. $700,000; $7,000,000
c. $300,000; $300,000
d. $300,000; $3,000,000

3. Refer to Balance Sheet 28-2. If the required reserve ratio is 20percent, what is the level of the bank's
excess reserves? How much could it loan out as a result?
a. $600,000; $600,000
b. $600,000; $3,000,000
c. $400,000; $400,000
d. $400,000; $2,000,000

4. Refer to Balance Sheet 28-2. If the required reserve ratio is 20percent, what is the level of the bank's
excess reserves? How much money could the excess reserves be usedto create in the banking system as a result?
a. $600,000; $600,000
b. $600,000; $3,000,000
c. $400,000; $400,000
d. $400,000; $2,000,000

5. If a bank receiving a new deposit of $200,000 would be able, asa result, to increase their lending by at most $150,000, then therequired reserve ratio equals:
a. 4%.
b. 25%.
c. 40%.
d. 50%.

6. If a bank gets a $100,000 new deposit, chooses to lend out$75,000, and increases its excess reserves by $5,000 at the sametime, then the reserve requirement is:
a. 30%.
b. 25%.
c. 20%.
d. unable to be determined from the information given.

Balance Sheet 28-2

Explanation / Answer

2.C 3.A 4.A 5.C 6.B

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