If a bank experiences a deposit outflow of $50 million with a required reserve ratio on deposits of 10%, which balance sheet would the bank rather have initially: Balance sheet A or balance sheet B? Why? Balance Sheet A Assets Liabilities Reserves $75 million Deposits $500 million Loans $525 million Capital $100 million Balance Sheet B Assets Liabilities Reserves $100 million Deposits $500 million Loans $500 million Capital $100 million

Balance Sheet B

Explanation:

Given Data:

Balance Sheet A

Assets                                          Liabilities

Reserves-- $75 million                Deposits --$500 million

Loans-- $525 million                   Capital --$100 million

Balance Sheet B

Assets                                          Liabilities

Reserves-- $100 million                Deposits-- $500 million

Loans--- $500 million                     Capital-- $100 million

Representing each balance sheet as follows:

Balance Sheet A

Assets           Amount                      Liabilities           Amount

Reserves      $75 million                  Deposits            $500 million

Loans            $525 million               Capital                $100 million

Total:               $600                                                    $600 million

Balance Sheet B

Assets            Amount                   Liabilities              Amount

Reserves        $100 million            Deposits              $500 million

Loans              $500 million           Capital                 $100 million

Total:               $600 million                                       $600 million

When there is a deposit of $50 million, the bank would be better off with balance sheet B because it initially has a higher amount of reserves. An outflow of $50 million would reduce the amount of reserves by $50 million since the bank has to maintain certain amount of required reserves held as assets to meet this requirement.

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.

answer; the nav calculated at the market close at 4: 00 pm new york time;