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# Assume that Banc One receives a primary deposit of \$1 million.

### Resolved Question:

Assume that Banc One receives a primary deposit of \$1 million. The bank must keep reserves of 20 percent against its deposits. Prepare a simple balance sheet of assets and liabilities for Banc One immediately after the deposit is received.

Assume that there are two banks, A and Z, in the banking system. Bank A receives a primary deposit of \$600,000 and it must be kept in reserves of 12 percent against deposits. Bank A makes a loan in the amount that can be safely lent.
Show what Bank A’s balance sheet of assets and liabilities would look like immediately after the loan.
Assume that a check is drawn against the primary deposit made in Bank A and is deposited in Bank Z. Show what the balance sheet of assets and liabilities would like for each of the two banks after the transactions take place.
Now assume that Bank Z makes a loan in the amount that can be safely lent against the funds deposited in its banks from the transaction described in (b). Show what Bank Z’s balance sheet of assets and liabilities would look like after the loan.

The SIMPLEX financial system is characterized by a required reserves ration of 11 percent; initial excess reserves are \$1 million and there are no currency or other leakages.
What would be the maximum amount of checkable deposits after the deposit expansion, and what would be the money multiplier?
How would you answer in (a) change if the reserve requirement had been 9 percent?
Submitted: 5 years ago.
Category: Multiple Problems
Expert:  KellyV2012 replied 5 years ago.

KellyV2012 :

Hi, I would like to assist you and I'm working on it. Thanks,

Expert:  KellyV2012 replied 5 years ago.

Hi,