Alex Horne Dr. Document Preview: Alex Horne Dr. Sakano Econ 415 11/22/2011 Econ415 Fall 2011 Extra-Credit Assignment for Learning Unit #22 Deposit Creation Analysis Due on Tuesday, November 22nd 20 Points Econ415 Fall 2011 Extra-Credit Assignment for Learning Unit #22 Deposit Creation Analysis On the following questions, you must clearly show your calculation (Do not simply write a number, but show how you get numbers by using a formula or explain in words how to get numbers). The First Carolina Bank (FCB), the banking system (including all banks in the economy), and the Fed have the following balance sheets. The required reserve ratio is 20%. FCB Fed Reserves $20 Securities $20 Loans $80 Deposits $100 Capital $20 Securities $200 Discount loan $50 C-in-C $150 Reserves $100 Banking System Reserves $100 Securities $200 Loans $500 Deposits $500 Discount loan $50 Capital $250 a. Suppose that the Fed provides $10 of discount loan to FCB. Show changes in FCBs balance sheet in T-account and a resulting balance sheet of FCB (after $10 discount loan). Also, show changes in the Feds balance sheet in T-account and a resulting balance sheet of the Fed (after $10 discount loan to FCB). FCB Reserves $0 Securities $20 Loans $80 Deposits $80 Capital $20 The Fed provide a discount loan of $10 to FCB. b. Based on your answer (a) above (after $10 discount loan to FCB), how much is a required reserve of FCB? How much additional loans can FCB make at most ($X)? Required Attachments: Extra-Credit.doc
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