Suppose that the First National Bank has the following balance sheet position and that the required reserve ratio is 15 percent.
Assets
Liabilities
Reserves
$40 million
Deposits
$200 million
Loans
$160 million
Bank Capital
$20 million
Securities
$20 million
What are the bank's a) required reserves and b) excess reserves?
If the bank was hit with a deposit outflow of $20 million, would it have to make an adjustment to the balance sheet? Why or why not?
If the bank has to make an adjustment to its balance sheet, what are its options? Explain?