Question

Suppose Joey deposits $100,000 in Bank 1 and Mary borrows $80,000 from Bank 1 to buy a Dodge Viper. The required reserve ratio for all banks (set by the Fed) is 20%. The Reserves, Loans and Demand Deposits respectively for Bank 1 are:

Select one:

a. $100,000; $80,000 and $20,000

b. $80,000; $100,000 and $20,000

c. $80,000; $20,000 and $100,000

d. $20,000; $80,000 and $100,000

Answer 1

Joey deposits $100,000 and Mary borrows $80,000. Also we are given the reserve requirement is 20% of total deposits.

The deposits in the balance sheet would be the one done by Joey which is $100,000.

20% of $100,000 is $20,000 which would be the reserves.

Also the money borrowed by Mary is $80,000 ie considered the loan given by bank.

So reserves are$20,000

Loans = $80,000

Demand deposits =$ 100,000

Hence answer is option D) 20,000 ;80,000;100,000

(You can comment for doubts)