State the effect on the entire banking system

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Reference no: EM13198476

a) Calculate Total Assets, and Total Liabilities for this T-account of the Bank of Summertime.

Bank of Summertime

Assets Liabilities

Reserves $20 000 Deposits $200 000

Loans $180 000

Total Total

b) Mr. Smith, a holder of a deposit account in Bank of Summertime, withdraws $ 2000 and immigrates to Wintertime. Show the position of the bank after it has adjusted to the withdrawal. (Assume no cash drain). Please, show all your work.

Assets Liabilities

Reserves Deposits

Loans

Total Total

c) State the effect on the entire banking system of Summertime.

All Banks in Summertime

Assets Liabilities

Reserves Deposits

Loans

Total Total

d) Show the final decrease in bank deposits after the whole process is completed.

e) Show the final decrease in bank deposits if there was a 10 % cash drain and 5% excess reserve holdings.

f) From (b) above, show the immediate changes in the T-account with an injection of $ 10,000 capital in the Bank of Summertime

Reference no: EM13198476

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