Question

I need help answering question 5 on page 322 of the macroeconomic 21st edition

assets (1) (2)	Liabilities and net worth	(1) (2')
Reserves $22,000
Securities $38,000	Checkable deposits= $100,000
Loans 40,000

The following balance sheet is for Big Buck Bank. The reserve ratio is for 20 percent.

a)what is the maximum amount of new loans that the bank can make?

b) by how much has the supply of money changed?

c)how much will the balance sheets appear after checks drawn for the entire amount of the new loan have been cleared against the bank?

d) Answer questions a,b,c on the assumption that the reserve ratio is 15%.

Answer 1

Table 1

	Assets	1	2		Liabilities and Net worth	1	2'
Reserve	22000	22000	20000	Checkable Deposit	100000	102000	100000
Securities	38000	38000	38000
Loans	40000	42000	42000

Table 2

	Assets	1	2		Liabilities and Net worth	1	2'
Reserve	22000	22000	15000	Checkable Deposit	100000	107000	100000
Securities	38000	38000	38000
Loans	40000	47000	47000