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1) Assume Bank East has= $100 million of demand deposits. Needed reserve ratio is= 15%. Bank is fully loaned up initially.

i) Create balance sheet of Bank East based on information given above.

ii) Assume Fed lowers needed reserve ratio from 15% to 10%. How much reserve can Bank East free up?

iii) Update Bank East's balance sheet suppose that bank leases the freed up reserve in reserve deposit account it has with Fed.

iv)(a) Update Bank East's balance sheet supposing bank decides to be fully loaned up again;(b) contrast updated demand deposit balance to initial balance in i) and describe the difference if any;(c) contrast updated loan balance to the initial balance in i) and describe the difference if any?

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Basic Finance, Finance

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