Question

Suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any excess reserves of new deposits. Use this information to complete the balance sheet below to show how Second Bank's assets and liabilities change when Ava withdraws the $300 from the bank. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. A Simple Bank Balance Sheet Assets Liabilities Change in Reserves: $ Change in Deposits: $ Change in Loans: $

Answer 1

As a result of withdrawal of $300 from the saving account. The decrease in the required reserve = 300 * 10% = $30. So, Change in reserve = -$30.

Decrease in loans (since there is no excess reserve) = $300 - $30 = $270

So, change in loans = -$270

Decrease in deposits = $300 (Because it is withdrawn). So, change in deposit = -$300

Balance Sheet

Assets Liabilities

Change in required reserve = -$30 | Change in deposit = -$300

Change in loan = -$270

Total Change -$300 -$300