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Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 10 percent.

Assets		(1)	(2)	Liabilities and net worth		(1')	(2')
Reserves	$24,000			Checkable deposits	$100,000
Securities	38,000
Loans	38,000

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 banks 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 (3) (4) Liabilities and net worth (3') (4') Reserves $24,000 Checkable deposits $100,000 Securities 38,000 Loans 38,000

What is the maximum amount of new loans that this bank can make?

$ ?

Show in columns 3 and 3' how the banks 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 banks 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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