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Experience:  MBA from IIM Calcutta, Engineer, 8+ years of exp. at executive level
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Beleaguered State Bank holds $ 250 million in deposit and maintai

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Beleaguered State Bank holds $ 250 million in deposit and maintains a reserve ratio of 10%.

A. Show the T account fro BSB.

B. Now suppose that BSB largest depositor withdrawals 10 million in cash from her account. If BSB decides to restore its reserves ratio by reducing the amount of loan outstanding show its new T account.

C. Explain what effect BSB action will have on other banks.

D. Why might it be difficult for BSB to take the action descried in part (b)? Discuss another way for BSB to return to its original reserves ratio.

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