ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 10 percent.
Assets
Liabilities and net worth
(1)
(2)
(1')
(2')
Reserves
$
25,000
Checkable deposits
$ 100.000
Securities
38,000
Loans
37,000
Instructions: Enter your answers as a whole number.
a. What is the maximum amount of new loans that Big Bucks Bank can make?
Using the table above, show in columns 1 and 1' how the bank's balance sheet will appear after the bank has lent this additional
amount by inserting the new values into the gray shaded cells of the given table.
b. By how much has the money supply changed?
c. How will the bank's balance sheet appear after checks drawn for the entire amount of the new loans have been cleared against the
bank? Show the new balance sheet in columns 2 and 2' by inserting the new values into the gray shaded cells of the given table.
d. Using the original figures, revisit questions a, b, and c based on the assumption that the reserve ratio is now 5 percent.
Assets
Liabilities and net worth
(3)
(4)
(3')
(4')
Reserves
2$
25,000
Checkable deposits
$ 100.000
Securities
38,000
Loans
37,000
What is the maximum amount of new loans that this bank can make?
Show in columns 3 and 3' how the bank's balance sheet will appear after the bank has lent this additional amount. Add the new values
into the gray shaded cells of the given table.
By how much has the money supply changed?
How will the bank's balance sheet appear after checks drawn for the entire amount of the new loans have been cleared against the
bank? Show the new balance sheet in columns 4 and 4' in the table above. Add the new values into the gray shaded cells of the given
table.
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