A bank has:
25 in reserves at the Fed
15 in AtM cash
60 in Gov't securities
100 in Loans
90 in demand deposits
110 in savings deposits
required reserve ratio is 5%
so if there is no currency drain and if all the funds loaned remained deposited in the First Student Bank, what is the quanity of loans and total deposits when teh bank has no excess reserves?
The bank's total deposit = demand deposits + savings deposits = 90+110=200
The required reserve = reserve ratio * deposits = 5% * 200 = 10
When the bank has no excess reserve, it will ...
A discussion of money creation and control ensues.