
Concept explainers
Subpart (a):
Balance sheet .
Subpart (a):

Explanation of Solution
The
Hence, the required reserves are $50 billion.
The excess reserves are evaluated as follows:
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:
Hence, the monetary multiplier is 4.
Then, the maximum amount of loans is evaluated as follows:
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 |
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):
Balance sheet.
Subpart (b):

Explanation of Solution
The required reserves are evaluated as follows:
Hence, the required reserves are $40 billion.
The excess reserves are evaluated as follows:
Hence, the excess reserves are $12 billion.
Thus, the monetary multiplier is evaluated as follows:
Hence, the money multiplier is 5.
Then the maximum amount of loans is evaluated as follows:
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
Hence, the banking system can lend $52 billion more.
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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Chapter 15 Solutions
Macroeconomics: Principles, Problems, & Policies
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