Scenario 16-1.The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 16-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks?

Question

Quizplus · Accepted Answer

The total deposits are 1,000 million dias. Required reserves are 100 million dias, and excess reserves are 25 million dias. Treasury bonds are 250 million dias. Therefore, loans = total deposits - (required reserves + excess reserves + treasury bonds) = 1,000 - (100 + 25 + 250) = 625 million dias.