Suppose the First National Bank acquires $1,000,000 in new deposits. Which of the following is true? a. Excess reserves on the new deposits are $12,000. b. Assets and liabilities increase by $1,000,000. c. Total reserves on the new deposits are $440,000. d. Excess reserves on the new deposits are $500,000. e. Required reserves on the new deposits are $60,000.

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Suppose the First National Bank acquires $1,000,000 in new deposits

Economics Dec 05, 2020

Suppose the First National Bank acquires $1,000,000 in new deposits. Which of the following is true?

	a.	Excess reserves on the new deposits are $12,000.
	b.	Assets and liabilities increase by $1,000,000.
	c.	Total reserves on the new deposits are $440,000.
	d.	Excess reserves on the new deposits are $500,000.
	e.	Required reserves on the new deposits are $60,000.

Expert Solution

Option b

With the acquisition of new deposits both assets and liabilities increases in a balance sheet, hence option b needs to be selected.

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