Question

17

Suppose the assets of the Silver Lode Bank are $150,000 higher than on the previous day and its net worth is up $20,000. By how much and in what direction must its liabilities have changed from the day before?

Instructions: Enter your answer as a whole number.

Liabilities   (Click to select)   increased   decreased  by $

ANS: is not 44,000

18

Suppose that Serendipity Bank has excess reserves of $14,000 and checkable deposits of $150,000.

Instructions: Enter your answer as a whole number.

If the reserve ratio is 20 percent, what is the size of the bank's actual reserves?

ANS: is not 20,000

19

Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $15,000 in currency into the bank and that currency is added to reserves.

Instructions: Enter your answer as a whole number.

What level of excess reserves does the bank now have?

ANS: is not 1,500

Answer 1

Answer:

Question17]

Remember that a balance sheet must satisfy the following equation:

Assets = Liabilities Net Worth

Thus, if the assets of the bank went up by $150,000, this must mean that liabilities plus net worth also went up by $150,000. Since we are given that net worth went up by $20,000, we have:

$150,000= Liabilities + $20,000

Liabilities = $150,000-$20,000

This means that liabilities must have increased by $130,000.

Question18]

Required Reserve= 20/100 of $150,000= $30,000

National Bank of Commerce has $14,000 excess reserve,

Actual Reserve= Required Reserve + Excess Reserve = $30,000 + $14,000 = $44,000

The National Bank of Commerce has $44,000 actual reserves.

Question19]

A household deposit of $15,000 into the bank is added to reserves

Actual reserves have risen to $35,000(20,000 + 15,000).

And the checkable deposits have risen to $115,000(100,000 + 15,000)

Required Reserves= $115,000 * 20/100 = $23,000

Excess Reserves= Actual Reserves - Required Reserves

=$35,000 - $23,000

= $12,000

Therefore, Excess reserves= $12,000