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Suppose that Bob withdraws $100 of cash from his checking account at Security Bank and uses it to buy a camera from Joe who deposits the

Suppose that Bob withdraws $100 of cash from his checking account at Security Bank and uses it to buy a camera from Joe, who deposits the $100 in his checking account in Serenity Bank. Assuming a reserve ratio of 10 percent and no initial excess reserves, determine the extent to which

(a) Security Bank finds itself short of required reserves,

(b) Serenity Bank finds it has excess reserves, and (c) loans, checkable deposits, and the money supply change as a result of the transactions.

Assets

Liabilities and net worth

   

(1)

(2)

 

 

1

2

Reserves

$22,000

   

Checkable

 

 

 

Securities

38,000

   

deposits

$100,000

 

 

Loans

40,000

       

 

 

Apr 29 2020 View more View Less

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