If you're seeing this message, it means we're having trouble loading external resources on our website. Show If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. .ⅰIf the government changes its spending without changing taxes to eliminate therecessionary gap, calculate the minimum required change in governmentspending..ⅱIf the government changes taxes without changing government spending toeliminate the recessionary gap, will the minimum required change in taxes begreater than, smaller than, or equal to the minimum required change ingovernment spending in part (d)(i) ? Explain.e.Assume the government lowers income tax rates to eliminate the recessionary gap.Will each of the following increase, decrease, or stay the same?.ⅰAggregate demand. Explain..ⅱLong-run aggregate supply. Explain.12.Banks play an important role in determining changes in the money supply.a.Assume that a bank receives a cash deposit of $9,000 from a customer. What is theimmediate impact of this transaction on the money supply? Explain.b.Suppose that the reserve requirement is 10 percent and banks voluntarily keep anadditional 10 percent in reserves. Calculate each of the following..ⅰThe maximum amount by which this bank will increase its loans from thetransaction in part (a).ⅱThe maximum increase in the money supply that will be generated from thetransaction in part (a)c.Assume that the government increases spending by $9,000, which is financed by asale of bonds to the central bank..ⅰIndicate what will happen to the money supply..ⅱExplain what will happen to the money demand.13.The Federal Reserve buys $5,000 in bonds from Clark Consulting Services, whichthen deposits the money in a checking account at First Generation Bank.a.As a result of the Federal Reserve’s action, what is the change in the money supplyif the required reserve ratio is 100 percent?b.If the required reserve ratio is reduced to 10 percent, calculate the following. The following is the balance sheet for Raymond Bank, one of many commercial banks in a country. Assets Liabilities and Equity Reserves $5,000 Deman deposits $20,000 Business loans $10,000 Student loans$8,000 Government securities $2,000 Equity (Net worth) $5,000 Total assets$25,000 Total liabilities and equity$25,000 (a) Calculate Raymond Bank's required reserves. (b) Calculate the maximum amount of additional loans that Raymond Bank can make without selling its holdings of government securities. (c) Assuming that Raymond Bank and other banks now lend out all excess reserves, calculate the maximum possible change in the following. (i) Demand deposits throughout the banking system (ii) Total reserves throughout the banking system (d) Suppose that the country's central bank purchases $1,000 of Raymond Bank's holdings of government securities as part of its open-market operations. Do Raymond Bank's required reserves initially increase, decrease, or remain the same as a result of the central bank's purchase? Explain. Answer & Explanation Solved by verified expert s a molestie consequat, ultrices ac magna. Fusce d congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui Unlock full access to Course Hero Explore over 16 million step-by-step answers from our library Subscribe to view answer Step-by-step explanation ce dui lectus, congue vel laoreet ac, dictum sum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulv molestie consequat, ultrices ac magna. Fus Donec aliquet. Lorem ipsum dolor sit amet, consectetur ad congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a m risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. ec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dap llentesq usce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapi ia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie cons m ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vi et, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dap How do you find the maximum value of additional loans?Therefore, to get the maximum amount of loans that can be issued, you multiply the size of the deposit by 1 minus the reserve ratio.
How do you calculate the maximum amount a bank can lend?What Is the Legal Lending Limit?. A legal lending limit is the most a bank or thrift can lend to a single borrower.. The legal limit for national banks is 15% of the bank's capital.. If the loan is secured by readily marketable securities, the limit is raised by 10%, bringing the total to 25%.. What is the maximum amount by which the bank can expand its loans?The maximum amount by which demand deposits can expand is given by the equation: ADD = AER/r. ADD is the expansion of demand deposits, AER is the excess reserves in the banking system, and r is the required reserve ratio. Thus, the maximum amount by which demand deposits can expand is equal to $30 million ($3/0.10).
What is the maximum amount of money the entire banking system can create?Banks can't create an unlimited amount of money. The money multiplier determines the limit of how much money a bank can create. The money multiplier is how much the money supply will change if there is a change in the monetary base.
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Calculate the maximum amount of additional loans that Raymond bank can make
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