1. Bank Balance Sheets HW Answers

2. The maximum possible loan is $20,000
Assets Liabilities
Reserves $90,000
Securities $25,000
Property $215,000
Loans $125,000
Demand Deposits $350,000
Net Worth $105,000
The maximum possible loan is $20,000
$90,000 – ($350,000 x .2)
Reserves become $70,000
Loans become $145,000

3. Sue Ellen deposits $40,000
FNB makes the maximum possible loan. Required reserves are $8,000 ($40,000 x .2).
Excess reserves are $32,000 ($40,000 - $8,000).
FNB loans out $32,000.

4. Assets Liabilities Reserves $78,000 Securities $25,000
Property $215,000
Loans $177,000
Demand Deposits $390,000
Net Worth $105,000
Demand deposits increase by $40,000 because that is the amount of the deposit. Reserves increase by $8,000 and loans increase by $32,000 following Sue Ellen’s $40,000 deposit.

5. David Puddy receives the loan from the FNB
David Puddy receives the loan from the FNB. He deposits the $ into the 13th National Bank
Assets Liabilities
Reserves +$32,000 Demand Deposits +$32,000
Required reserves increase by $6,400
Excess reserves increase by $25,600
The bank may loan out $25,600
(The math will be easier on the FRQ!)

6. New Money
Max. amt. of new deposits = 1st loan x monetary multiplier = $32,000 x 5 = $160,000

7. The maximum increase in the money supply is $50,000 ($10,000 x 5).
Fed buys bonds
Reserves $88,000
Securities $15,000
Property $215,000
Loans $177,000
Demand Deposits $390,000
Net Worth $105,000
The FNB may lend all $10,000. (none of the $ must be kept in required reserves since demand deposits didn’t change.)
The maximum increase in the money supply is $50,000 ($10,000 x 5).