5. (4 pts) Consider a bank with the following balance sheet: A ____________________________ L+NW

1000 (A) 750 (L)

250 (Capital)

Compute

(a) the capital ratio and

(b) the leverage ratio.

(c) How will this balance sheet change if the assets lose 10% of their value? Rewrite it.

(d) How will this balance sheet change if the assets lose 30% of their value? Rewrite it

6. (4 pts) For each of the following changes, state if the IS or LM curve shifts, and if so, if it shifts right or left or up or down.

a. Expected inflation rises by 2%

b. Expected inflation falls by 1%

c. The risk premium, x, rises by 1%

d. The risk premium, x, falls by 2%

7. (4 pts) How did the fall in housing prices create a financial crisis?

What macroeconomic implication did it have?

Please answer all questions