Suppose that the reserve requirement is 12 percent and the balance sheet of the People's National Bank looks like the accompanying example.
a) What are the required reserves of People's National Bank? Does the bank have any excess reserves?
b) What is the maximum loan that the bank could extend?
c) Suppose that the required reserves were 20 percent. If this were the case, would the bank be in a position to extend any additional loans? Explain.
Assets Liabilities
Vault Cash $20,000 Checking deposits $200,000
Deposits at Fed $30,000 Net worth $15,000
Securities $45,000
Loans $120,000