Question

Examine the following simplified T-account for First Federal Savings Bank to answer questions 1 to 10. Assume a 10% minimum reserve requirement.

Assets	Liabilities
Reserves $30,000	Deposits $150,000
Loans $120,000

After First Federal Savings Bank lends out its excess reserves to Justin, suppose that Travis deposits $1,000 into his account at First Federal Savings Bank. What is the new value of deposits in the T-account at this bank? I GOT 151,000 WHICH IS CORRECT.

Continuing from the previous question, what is the new value of reserves in the T-account at this bank? Continuing from the previous question, what is the new minimum reserve requirement at this bank in terms of dollars?

Answer 1

a) Ans - $151,000

As new deposit of $1000 added to old deposit of $150,000 and make it $151,000

b) As First Federal Savings Bank lends out its excess reserves to Justin ( before travis deposit $1000) so the excess reseve before is

Excess reserve = total reserve - required reserve

Required reserve = 150,000*10% = 15000

Excess reserve = 30,000-15,000 = 150,000

Bank lend out his $15,000 to Justin. Means loans = 120,000+15000 = 135,000

So now Reserves = $15000 and after the new deposit of $1000

the new value of reserves in the T-account at this bank = 15000+1000 = 16000

the new minimum reserve requirement at this bank in terms of dollars = 10% of new deposit

= 151,000*10%

= $15100

**Hope it helps. Please hit like, if satisfied**