Northern Bank: Balance Sheet

question 96

Multiple Choice

Northern Bank: Balance Sheet
Assets Liabilities
Reserves $800 Deposits $10 000
Loans $11 200 Capital $2000
$12 000 $12 000
TABLE 26-6
-Refer to Table 26-6.Assume that Northern Bank's target reserve ratio is 10%.In order to achieve its target reserve ratio,Northern Bank must ________ and ________.

• A)increase its reserves by $200; decrease its deposits by $200
• B)increase its reserves by $400; decrease its deposits by $400
• C)not change its reserves; not change its deposits
• D)increase its reserves by $200; decrease its loans by $200
• E)increase its reserves by $400; increase its loans by $800

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