Question

Question(2 points) Consider the following balance sheet for the Wahoo Bank. Use it to answer the two questions that follow. Use a required reserve ratio of 10% and assume that the bank keeps no excess reserves. 16th attempt Part 1 (1 point)See Hint What will change on the balance sheet if Shantee withdraws $200 from her checking account? Choose one or more:
A. Required reserves decrease by $200.
B. Outstanding liabilities increase by $200.
C. Required reserves decrease by $20.
D. Outstanding liabilities decrease by $200.

Part 2 (1 point)See Hint What will change on the bank's balance sheet if Dalon deposits $650 into his checking account? Choose one or more:

A. Required reserves increase by $65.00.
B. Outstanding liabilities decrease by $650.
C. Required reserves increase by $650.
D. Outstanding liabilities increase by $650.

Answer 1

Answer:

C. Required reserves decrease by $20.

D. Outstanding liabilities decrease by $200.

A. Required reserves increase by $65.00.

D. Outstanding liabilities increase by $650.

Explanation:

PART I: The withdrawal from the checking accounts:

makes the required reserves to decrease as there is less cash deposists.

Also, the bank no longer has the obligation to give this 200 dollars to Shantee thus, otstanding liabilities decrease by 200 as well:

checking deposits 200 debit

               cash                            200 credit

PART II: Deposit in a checking account

This is the opposite. The bank reserve must increase by 10% of the deposit

650 x 10% = 65

And the outstanding liaiblities increase by the full amount as later the bank will give back 650 dollars to Dalon in the future.