Question

When you answer 4 short-answer questions, don't write in cursive. Please, print your answers. For all questions, be sure to explain your answers and to use graphs whenever appropriate. When you use graphs, be sure to (1) label y and x axis and (2) draw appropriate arrows if any curve shifts. 21) Consider a Bank that has the following balance sheet: Assets Liabilities Reserves $50 million Checkable deposits $200 million Securities $50 million Loans $150 million Bank Capital $50 million If the required reserve ratio is 10%, what actions should the bank manager take if there is an unexpected deposit outflow of $50 million? Explain all the options, and which one he/she is most likely to take. (5 points)

Answer 1

Answer: Balance sheet showing information after cash outflow of $50 million

Assets. Amount	Liabilities. Amount
Reserve $15 million Securities. $35 million Loan $150 million	Checkable deposits. $150 million Bank capital. $50 million

This shows that when bank outflow deposits by $50 million than the reserve has been decreased by $35 million and as required ratio is 10% which shows that $35 has been taken out from that and remaining $15 million from the securities. The best option is that

Another option is that reduced the loan amount to $100million .Third Option reduced entirely the securities and remain loan as well as reserve at the same value.