Suppose that Big Bucks Bank has the simplified balance sheetshown below and that the reserve ratio is 20 percent:
Instructions: All answers to this question should beentered as whole numbers.
Assets Liabilities and net worth (1) (2) (1') (2')
Reserves
$22,000
$
$ Checkable deposits $ 100,000 $ $
Securities
38,000
$
$
Loans
40,000
$
$
a. What is the maximum amount of new loans thatBig Bucks Bank can make? $
Show in columns 1 and 1' how the bank's balance sheet will appearafter the bank has lent this additional amount.
b. By how much has the supply of money changed?$
c. How will the bank�s balance sheet appear afterchecks drawn for the entire amount of the new loans have beencleared against this bank? Show this new balance sheet in column 2and 2'.
d. Revisit parts a.,b., and c., and provide answersbelow based on the assumption that the reserve ratio is now 15percent.
What is the maximum amount of new loans that this bank can make?$
Show in column 3 and 3' (below) how the bank�s balance sheet willappear after the bank has lent this additional amount.
By how much has the supply of money changed? $
Assets Liabilities (3) (4) (3') (4')
Reserves
$22,000
$
$ Checkable deposits $ 100,000 $ $
Securities
38,000
$
$
Loans
40,000
$
$
Suppose that Big Bucks Bank has the simplified balance sheetshown below and that the reserve ratio is 20 percent:
Instructions: All answers to this question should beentered as whole numbers.
Assets | Liabilities and net worth | |||||||
(1) | (2) | (1') | (2') | |||||
Reserves | $22,000 | $ | $ | Checkable deposits | $ 100,000 | $ | $ | |
Securities | 38,000 | $ | $ | |||||
Loans | 40,000 | $ | $ | |||||
a. What is the maximum amount of new loans thatBig Bucks Bank can make? $
Show in columns 1 and 1' how the bank's balance sheet will appearafter the bank has lent this additional amount.
b. By how much has the supply of money changed?$
c. How will the bank�s balance sheet appear afterchecks drawn for the entire amount of the new loans have beencleared against this bank? Show this new balance sheet in column 2and 2'.
d. Revisit parts a.,b., and c., and provide answersbelow based on the assumption that the reserve ratio is now 15percent.
What is the maximum amount of new loans that this bank can make?$
Show in column 3 and 3' (below) how the bank�s balance sheet willappear after the bank has lent this additional amount.
By how much has the supply of money changed? $
Assets | Liabilities | |||||||
(3) | (4) | (3') | (4') | |||||
Reserves | $22,000 | $ | $ | Checkable deposits | $ 100,000 | $ | $ | |
Securities | 38,000 | $ | $ | |||||
Loans | 40,000 | $ | $ |