Suppose Jerome deposits $100,000 in Bank of America

Question

Suppose Jerome deposits $100,000 in Bank of America and Yolanda borrows $80,000 from Bank of America to buy a nice condo from Jenifer in Dallas. The required reserve ratio for all banks set by the Federal Bank (The Fed) is 20%. Jennifer deposits the money from Yolanda’s condo purchase in Wells Fargo. Assume that there are no currency drains.

a. Show a T-account for both banks (separately).

b. What is the level of required reserves Bank of America must hold after Jerome’s deposit?

c. What is the level of required reserves Wells Fargo must hold after Jennifer’s deposit?

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What is the level of required reserves Wells Fargo must hold after Jennifer’s deposit? was first posted on February 7, 2019 at 5:44 pm.
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What is the level of required reserves Wells Fargo must hold after Jennifer’s deposit?

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