(Answered) 1 the table below shows the balance sheet for a commercial

Management Studies

1) The table below shows the balance sheet for a commercial bank called Regal Bank. Assume that Regal bank has achieved its target reserve ratio.

Assets Liabilities

Reserves $400 Deposits $4000

Loans $4200 Capital $600

A) What is the bank's target reserve ratio?

B) Suppose a new deposit is made to Regal Bank of $100. Draw a new balance sheet to show the immediate effects of the new deposit.

C) Now suppose all commercial banks have the same target reserve as Regal Bank. This economy experiences a cash drain of 10%. In total how much money would be created in the economy as a result of the new deposit?

D) List any three functions of the Central Bank

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