Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 16 - The Monetary System - Questions For Review - Page 342: 7

Answer

Bank B will show a larger change in bank capital. The decrease in assets causes its assets to fall below its liability meaning that it will have a decrease in bank capital of 140%. Bank A only loses half of that (70%).

Work Step by Step

This question asks you to understand liability assets and the solvency of banks. When their assets decline to a certain point they experience losses like Bank B own this situation.
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