Question

Suppose that a lottery winner deposits $20 million in cash into her transactions account at the...

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

Homework Answers

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

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