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: include a negative sign if necessary.
Assets Liabilities
Change in Reserves: $_____ Change in Deposits: $_
Change in Loans: $_________

Change in Reserves = Amount withdrawn by Ava * Reserve requirement faced by Second Bank = $300 * 10% = $30. This is a reduction and will be negative in the Second Bank's Balance Sheet.

Change in Deposits = Amount withdrawn by Ava = $300. This is a reduction and will be negative in the Second Bank's Balance Sheet.

Change in loan = Amount withdrawn by Ava - Change in Reserves = $300 - $30 = $270. This is a reduction and will be negative in the Second Bank's Balance Sheet.

andromache andromache · Answer 2 · 2022-03-29T16:11:49+02:00

Change in Reserves: –$30 .

Change in Deposits: –$300

Change in Loans: –$270

Calculation of change in reserves, deposits and loans:

Since

Change in Reserves = Amount withdrawn by Ava * Reserve requirement faced by Second Bank

= $300 * 10%

= $30.

This represent a reduction and will be negative on the Second Bank's Balance Sheet.

Now

Change in Deposits = Amount withdrawn by Ava

= $300.

This is a reduction and will be negative on the Second Bank's Balance Sheet.

And,

Change in loan = Amount withdrawn by Ava - Change in Reserves

= $300 - $30 = $270.

This is a reduction and will be negative in the Second Bank's Balance Sheet.

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