If reserves in the banking system increase by 1 billion because the Fed lends 1 billion to financial institutions, and checkable deposits increase by 99 billion, why isn’t the banking system in equilibrium? What will continue to happen in the banking system until equilibrium is reached? Show the T-account for the banking system in equilibrium.

Respuesta :

As long as there are extra million in reserves, the banking system is still out of balance. unless equilibrium is reached with an additional billion in verifiable deposits, additional reserves will be stopped in the T-account.

The upward line running down the middle and the even line under "Resources" and "Liabilities" form a T, which is sometimes referred to as a T-shape. The "T" in a T-account separates a firm's assets from its liabilities on the right and left, respectively. T accounts are used by accountants to provide easier-to-manage double entry system bookkeeping.

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