Please answer the questions based on the following partial balance sheet for the
ID: 1116968 • Letter: P
Question
Please answer the questions based on the following partial balance sheet for the 1st National Bank of Anywhere.
Assets Liabilities___________
Cash 200,000 DD 2,000,000 XR = 20,000
Dep at Fed 120,000
Treasury Bills 80,000
36. This bank can safely expand its loan portfolio by _______ dollars.
37. Suppose all other banks in the system are “fully loaned up” and they face the same reserve ratio. The maximum potential increase in the money supply is _______dollars.
38. If the Fed were to change the rr to 10% for this bank then
a. this bank would have a deficiency in its reserves.
b. could expand its loan portfolio by an additional 100,000.
c. would need to sell some of its T-bills to raise reserves.
d. could expand its loan portfolio by 120,000.
e. none of the above are correct.
Explanation / Answer
23. This bank has RR in the amount of 120,000 dollars.
Working: Deposits at FED equals $120,000
24. The rr for this bank is equal to fraction of its deposit
Explanation: The reserve ration equaks the deposit fraction
25. This bank can safely expand its loan portfolio by 20,000 dollars.
Working: XR = 20,000
26. Suppose all other banks in the system are "fully loaned up" and they face the same reserve ratio. The maximum potential increase in the money supply is $80,000
Working: Treasury Bills 80,000
27. If the Fed were to change the rr to 10% for this bank then
Solution: none of the above
Working: 10 %*2,000,000 = 200,000