Question

Suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any excess reserves of new deposits. Use this information to complete the balance sheet below to show how Second Bank's assets and liabilities change when Ava withdraws the $300 from the bank. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. A Simple Bank Balance Sheet Assets Liabilities.
Change in Reserves: $ -30
Change in Deposits: $ -300
Change in Loans: $ -270

Answer 1

Answer:

Due to withdrawal of the $300 from saving account. Decrease in the required reserve = 300*10% = $30. So, Change in reserve = -$30

Decrease in loans as there is no excess reserve) = $300 - $30 = $270. So, the change in loans = -$270

Decrease in deposits since it is withdrawn = $300. So, the change in deposit = -$300

                                           Balance Sheet

                  Assets                                              Liabilities

Changes in required reserve = -$30       Change in deposit = -$300

Changes in loans = -$270

Total Change = -$300                               Total Change = -$300