Using the balance sheet below and assuming a required reserve ratio of 20%, answer the following: (a) What is the amount of excess reserves? (b) This bank can safely expand its loans by what amount? (c) By expanding its loans by this amount in part (b), its checkable deposits would expand to what amount (if all loans were made to checking account customers)? (d) If checks clear against the bank equal to the amount loaned in (b), how much would remain in reserves and in checkable deposits?
Assets Liabilities + Net Worth
Reserves $ 40,000
Loans 70,000
Securities 50,000
Property 400,000 Checkable deposits $100,000
Stock shares 460,000