QUESTION: YOUR BANK HAS THE FOLLOWING BALANCE SHEET: Assets Liabilities Reserves $ 50 million Checkable deposits $200 million Securities 50 million Loans 150 million Bank capital 50 million IF...

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QUESTION: YOUR BANK HAS THE FOLLOWING BALANCE SHEET:
Assets                                            Liabilities
Reserves     $   50million             Checkable deposits        $200 million
Securities        50million
Loans            150million             Bankcapital                    50 million
IF THE REQUIRED RESERVE RATIO IS 10%, WHAT ACTIONS SHOULD THEBANK MANAGER TAKE IF THERE IS AN UNEXPECTED DEPOSIT OUTFLOW OF $50MILLION?

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BANK HAS THE FOLLOWING BALANCE SHEET:

Assets Liabilities

Reserves $ 50 million Checkable deposits $200 million

Securities 50 million

Loans 150 million Bank capital 50 million

Transaction: UNEXPECTED DEPOSIT OUTFLOW OF $50 MILLION

Balance sheet after transaction:

Assets Liabilities

Reserves $ 0 million Checkable deposits $150 million

Securities $ 50 million

Loans $ 150 million Bank capital 50 million

Required reserve ratio = 10%

Therefore required reserve = $ 150 million x 10% = $ 15 million

Therefore, bank manager should sell securities of $ 15 million and keep it in reserves to meet the requirement of minimum reserve ratio.

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QUESTION: YOUR BANK HAS THE FOLLOWING BALANCE SHEET:Assets Liabilities Reserves $ 50million Checkable deposits $200 millionSecurities 50million Loans 150million Bankcapital 50 millionIF THE REQUIRED RESERVE RATIO IS 10%, WHAT ACTIONS SHOULD THEBANK MANAGER TAKE IF THERE IS AN UNEXPECTED DEPOSIT OUTFLOW OF $50MILLION?