The balance sheet at the top of the next page is for Big Bucks Bank. The reserve ratio is 20 percent. LO3

a. What is the maximum amount of new loans that Big Bucks Bank can make? Show in columns 1 and 19 how the bank’s balance sheet will appear after 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 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 29.

d. Answer questions

a, b, and c on the assumption that the reserve ratio is 15 percent.

Transcribed Image Text:

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