Suppose you deposit $2000 in currency into your cheque account at a branch of the Commonwealth Bank, which we will assume has no access reserves at the time you make your deposit. Also assume that the bank maintains a reserve ratio of 0.2, or 20%
a) Use a T account to show the initial impact of this transactions on the Commonwealth Bank's balance sheet
b) Suppose the Commonwealth Bank makes the maximum loan they can from the funds you deposited. Using a T-account, show the initial impact of granting the loan on the bank's balance sheet. Also include on this T-account the transaction from (a).
c) Now suppose that whoever took out the loan in (b) writes a cheque for this amount and the person receiving the cheque deposits it in a branch of the Westpac bank. Show the effect of these transactions on the balance sheets of the Commonwealth Bank and the Westpac Bank, after the cheque has been cleared. (On the T-account for the Commonwealth Bank, include the transactions from (a) and (b))