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

-> 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