Homework Answers
(a)
Required reserves = Deposit x reserve ratio = $7000 x 10% = $700
Excess reserves = Deposit - required reserves = $7000 - $700 = $6300
| Assets | $ | Liabilities | $ |
| Reserves | Deposits | 7000 | |
| Required | 700 | ||
| Excess | 6300 | ||
| 7000 | |||
| Total assets | 7000 | Total liabilities | 7000 |
(b) Potential deposit creation = Excess reserves / Reserve ratio = 6300 / 0.1 = 63000
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