Discussion:
Assume that there are two baks, a and z, in the banking system. bank a receives a primary deposit of $600,000, and it must keep reserves of 12 percent against deposits. Bank A makes a loan in the amount that can be safely lent.
A. show what bank A's balance sheet of assetsand liabilities would look like immediately after the loan.
B. assume hat a check is drawn against the primary deposit made in Bank A and is deposited in Bank Z. Show balance sheet of assets and liabilities would lok like for each of the two banks after the transaction has taken place.
C. now assume tht Bank Z maes a loan in the amount that can be safety lent against the funds deposited in its bank fom the transaction describes in (b). Show what banks z's balance sheet of assets and liabilities would look like after the loan.