The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.
Table 13.2
$\begin{array}{c}
\text { Balance Sheet of National Bank }\
\quad\quad\quad\text { Assets } \quad\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }\
\begin{array}{|c|c|c|c|}
\hline\text { Vault Cash } & \$ 1,725 & \text { Deposits } & \$ 5,450 \
\text { Deposit in Fed } & \$ 425 & & \
\text { Loans } & \$ 3,300 & & \
\hline \text { Total Assets } & \$ 5,450 & \text { Total Liabilities } & \$ 5,450\
\hline
\end{array}\end{array}$

-Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.
A) $1,605
B) $1,180
C) $545
D) $5,450
E) $2,150

Question

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.
Table 13.2
 $\begin{array}{c}
\text {  Balance Sheet of National Bank }\
\quad\quad\quad\text { Assets } \quad\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }\
\begin{array}{|c|c|c|c|}
\hline\text { Vault Cash } & \$ 1,725 & \text { Deposits } & \$ 5,450 \
\text { Deposit in Fed } & \$ 425 & & \
\text { Loans } & \$ 3,300 & & \
\hline \text { Total Assets } & \$ 5,450 & \text { Total Liabilities } & \$ 5,450\
\hline
\end{array}\end{array}$

-Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.
A) $1,605
B) $1,180
C) $545
D) $5,450
E) $2,150

Quizplus · Accepted Answer

The maximum amount of loanable funds available with the bank is equal to the excess reserves, which is equal to the total reserves minus the required reserves. The required reserves are equal to 10 percent of the deposits, which is $5,450 * 0.10 = $545. The total reserves are equal to the vault cash plus the deposits in the Fed, which is $1,725 + $425 = $2,150. Therefore, the excess reserves are equal to $2,150 - $545 = $1,605.

The Table Given Below Shows the Assets and Liabilities of the National