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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.

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.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
Problem 4PA
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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.
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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