Balance sheet .

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Subpart (b):

To determine

Balance sheet.

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Subpart (b):

To determine

Balance sheet.

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Subpart (b):

To determine

Balance sheet.

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Subpart (b):

To determine

Balance sheet.

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Subpart (b):

To determine

Balance sheet.

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Answer 6

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Answer 7

Chapter 15, Problem 6P

Subpart (a):

To determine

Balance sheet.

Answer 8

Subpart (a):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.25×200 billion =$50 billion

Hence, the required reserves are $50 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$50 billion =$2 billion

Hence, the excess reserves are $2 billion.

The maximum amount of a banking system is obtained by taking the product of the monetary multiplier and the amount of excess reserves. Thus, the monetary multiplier can be calculated as follows:

Monetary multiplier=1Required Reserve Ratio =10.25 =4

Hence, the monetary multiplier is 4.

Then, the maximum amount of loans is evaluated as follows:

Maximum amount of loans=4×$2 billion =$8 billion

Hence, the maximum amount of loan is $8 billion.

Table -1 shows the consolidated balance sheet obtained from the given diagram.

Table -1

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$208
Securities	48	48
Loans	100	108

Answer 9

Subpart (a):

Expert Solution

Answer 10

Subpart (a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Answer 13

Subpart (b):

To determine

Balance sheet.

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.

Answer 14

Subpart (b):

To determine

Balance sheet.

Answer 15

Subpart (b):

Expert Solution

Explanation of Solution

The required reserves are evaluated as follows:

Required Reserves=Required Reserve Ratio×Checkable deposits =0.20×$200 billion =$40 billion

Hence, the required reserves are $40 billion.

The excess reserves are evaluated as follows:

Excess Reserves=Actual Reserves-Required Reserves =$52 billion-$40 billion =$12 billion

Hence, the excess reserves are $12 billion.

Thus, the monetary multiplier is evaluated as follows:

Money multiplier=1Required Reserve ratio =10.2 =5

Hence, the money multiplier is 5.

Then the maximum amount of loans is evaluated as follows:

Maximum amount of loans=Money multiplier×Excess Reserves =5×$12 billion =$60 billion

Hence, the maximum amount of loans is $60 billion.

Table -2 shows the new consolidated balance sheet obtained from the given diagram.

Table -2

Assets			Liabilities and Net worth
		(1)			(2)
Reserves	$52	$52	Checkable deposits	$200	$260
Securities	48	48
Loans	100	160

With the required reserve ratio of 20% (rather than 25%), the difference in the amount of the commercial banking system is evaluated as follows:

Difference in the amount that the banking system can lend =(1st Maximum amount of loan-2nd Maximum amount of loan) =$60 billion-$8 billion =$52 billion

Hence, the banking system can lend $52 billion more.

Answer 16

Subpart (b):

Expert Solution

Answer 17

Subpart (b):

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Concept introduction:

Balance sheet: Itis a financial statement that encapsulates an organization’s assets, their liabilities, and equity of the shareholders at a particular point in time.