Assets___________                                     Liabilities______

Cash                              80,000                  DD     2,000,000                   XR = 20,000

Dep at Fed                  120,000   

Treasury Bills   80,000

1. This bank has RR in the amount of _____ dollars.

2. The rr for this bank is equal to _____.

3. This bank can safely expand its loan portfolio by _______ dollars.

4. Suppose all other banks in the system are “fully loaned up” and they face the same reserve ratio. The maximum potential increase in the money supply is._____

5. If the Fed were to change the rr to 10% for this bank then

            a. this bank would have a deficiency in its reserves.

            b. could expand its loan portfolio by an additional 100,000.

            c. would need to sell some of its T-bills to raise reserves.

            d. could expand its loan portfolio by 120,000.

            e. none of the above are correct