Suppose that Karen deposits $500 into her checking account at the bank. The reserve requirement for Karen's bank is 12%. Assume the bank does not want to hold any excess reserves of new deposits. a. Use this information to complete the balance sheet below to show how the bank's assets and liabilities change when Karen deposits the $500. Instructions: Enter your answers as a whole number. A Simple Bank Balance Sheet Assets Liabilities Change in Reserves: $ Change in Deposits: $ Change in Loans: $ b. Why are deposits considered liabilities for a bank? Deposits can be loaned out by the bank. The bank must pay interest on deposits. The bank must hold deposits as reserves at the Federal Reserve. Deposits can be withdrawn at any time.
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