daryl soedojo

2101705196

Chapter 31

The following table shows government spending and tax revenue for a hypothetical
economy over a five-year period. All figures are in billions.
(a) In what years were there budget deficits and what were the amounts?
(b) In what year was there a budget surplus and what was the amount?
(c) What is the public debt in this economy over the five years?
(d) If the size of the economy (GDP) was $4000 billion, what would be the public debt as a
percentage of GDP?

Chapter 33

Using the balance sheet below and assuming a required reserve ratio of 20%, answer the
following: (a) What is the amount of excess reserves? (b) This bank can safely expand its
loans by what amount? (c) By expanding its loans by this amount in part (b), its checkable
deposits would expand to what amount (if all loans were made to checking account
customers)? (d) If checks clear against the bank equal to the amount loaned in (b), how
much would remain in reserves and in checkable deposits?

Answers
Chapter 31

a) In the 3rd, 4th, and 5th year there is budget deficit amounting $25 billion, $50 billion,
$75 billion.
b) In 1st year there is only budget surplus amounting $25 billion.
c) Over five years the total debt is $150 billion.
d) As a percentage of GDP the debt is 3.75% of the total GDP of $4000 billion.

Chapter 33

A) As a loan and securities value

= 70 000 + 50 000
= 120 000

So reserve to be maintained = 20% of 120 000 = $24 000

But actual reserve = 40 000

B) Bank can expand its loan by

= 70 000 + 16 000
= $86 000

C) By expanding this amount checkable deposite wont change