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soldi70 [24.7K]
3 years ago
10

Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserv

e ratio is 20%. Paolo, a client of First Main Street Bank, deposits $750,000 into his checking account at First Main Street Bank.
a. Complete the following table to reflect any changes in First Main Street Bank's T-account (before the bank makes any new loans).

Assets Liabilities

b. Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%.

(Dollars) (Dollars) (Dollars)
750,000
Business
1 answer:
Svetllana [295]3 years ago
3 0

Answer and Explanation:

a. The completion of the following table to reflect any changes in First Main Street Bank's T-account is shown below:-

<u>First Main Street Bank's Balance Sheet </u>

<u>Assets           Amount          Liabilities                         Amount</u>

Reserves     $750,000      Checkable Deposits       $750,000

b. The completion of the following table to show the effect of a new deposit on excess and required reserves is shown below:-

<u>Amount deposited</u>      Change in excess  Change in required

                                            <u>reserves</u>                     <u>reserves</u>

$750,000                            $600,000                    $150,000

                                  ($750,000 - $150,000)     ($750,000 × 20%)

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