How much is the bank required to hold as reserves

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Reference no: EM13232697

Assets LIABILITIES

RESERVES $ 500 $ 3,500 deposits
DEPOSITS

LOANS 3,000

The required reserve ratio is 10 percent.

A. How much is the bank required to hold as reserves, given its deposits
of $ 3,500?

B. How much are its excess reserves ?

C. How much can the bank increase its loans ?

d. Suppose a depositor comes to the bank and withdraws $200 in cash. Show the banks new balance sheet assuming the bank obtains the cash by drawing down its reserves. Does the bank now hold excess reserves? Is it meeting the required reserve ratio? If not, what can it do?

Reference no: EM13232697

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