Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of dollars. If the commercial banking system actually loans out the maximum amount it is able to lend, excess reserves will fall

Question

Business

Kenneth Cannon

5 December, 07:36

Refer to the accompanying consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of dollars. If the commercial banking system actually loans out the maximum amount it is able to lend, excess reserves will fall

+1

Answers (1)

Know the Answer?

Brodie Patterson · Answer 1

If the commercial banking system actually loans out the maximum amount it is able to lend, excess reserves will fall to Zero.

Explanation:

The most key elements of the entire financial system are commercial banks. A commercial bank is an agency based on profits that give loans, receive deposits and sell other financial services, including overdraft and digital funds transfers.

Investments and lending money are the main activities of a commercial bank. Deposits are investments of money, real, or time. A commercial bank also lent its customers resources in the type of loans and loan advances, cash loans, overdraft and bill discounts, etc.

If excess reserves of a bank equal to zero, they are lent when excess reserves of a bank exceed zero. Finally, we neglect other investments than stocks, loans, and savings except for checkable deposits.