Question

Suppose that a lottery winner deposits $20 million in cash into her transactions account at the Bank of America.
Assume a reserve requirement of 15 percent and no excess reserves in the banking system prior to this deposit.
Show the changes on the Bank of America balance sheet when the $20 million is initially deposited.
	BANK OF AMERICA
	Assets			Liabilities
	Change in required reserves		? million	Change in Deposits		? million
	Change in excess reserves		? million
	Change in total reserves		? million

Answer 1

=> ANSWER ::

-> Balance Sheet Of Bank Of America ::

Assets	Amount($ Million)	Liabilities	Amount($ Million)
Change In Required Reserve :	3	Change Deposits	20
Change In Excess Reserve :	17
Change In Total Reserve (RR + Excess Reserve)	20

=> Reserve Requirement ::

Reserve Ratio = 15%

RR = Deposit * Reserve Ratio

So, RR = $20 Million * 15/100

= $3 Million (Reserve Requirement)

=> Change In Excess Reserve = Deposit - Reserve Requirement

= $20 Million - $3 Million

= $17 Million