What isthe max amount of new loans that this bank can make? How will appear on the balance sheet after the bank has lent this money? (show in column 1)

Explain how the supply of money changed?
How will the bank's bal sheet appear after checks drawn fortghe entire amount of the new loan have cleared. (show in column 2)

balance sheet:
Assets (1) (2) Liabiities & net worth
Reserves $22,000 Checkable deposits $100,000
securities $38,000
Loans $40,000

Im guessing that the balance sheet you presented is an initial starting point. Correct?? So, to answer the question, you need to present what changed. E.g., "an additional 1000 was deposited in person's checking account" Second, you need the reserve requirement (e.g, RR=22%).

To determine the maximum amount of new loans a bank can make, we need to understand the reserve requirement and the concept of fractional reserve banking.

Fractional reserve banking allows banks to lend out a fraction of the deposits they receive and hold only a percentage of those deposits as reserves. The reserve requirement is the minimum percentage of deposits that banks must hold as reserves. In this case, you mentioned that the reserve requirement is 22%.

Initially, on the bank's balance sheet, we can see that the bank has $22,000 in reserves, $38,000 in securities, and $40,000 in loans. Checkable deposits, which represent the money held by depositors, are $100,000.

To find the maximum amount of new loans the bank can make, we need to calculate the excess reserves, which is the difference between the actual reserves and the required reserves.

Required reserves = Reserve requirement x Checkable deposits
Required reserves = 0.22 x $100,000 = $22,000

Excess reserves = Actual reserves - Required reserves
Excess reserves = $22,000 - $22,000 = $0

Since the bank has no excess reserves, it cannot make any additional loans beyond the $40,000 already shown on the balance sheet.

Now, let's consider the changes that will appear on the balance sheet after the bank lends out the money. When the bank lends the entire $40,000, it increases the checkable deposits of borrowers by that amount.

Here's how the balance sheet would appear in column 1 after the bank has lent the money:

Assets (1) Liabilities & Net Worth
Reserves $22,000 Checkable deposits $140,000
Securities $38,000
Loans $0

As for how the supply of money changes, when the bank lends out the money, it increases the amount of checkable deposits in the economy. This means that the supply of money in circulation has increased by $40,000.

Lastly, you mentioned checks drawn for the entire amount of the new loan. When these checks are cleared, the checkable deposits of the borrowers will decrease by that amount, and the bank's reserves will increase as depositors' funds are transferred back to the bank.

Here's how the balance sheet would appear in column 2 after the checks have cleared:

Assets (2) Liabilities & Net Worth
Reserves $62,000 Checkable deposits $100,000
Securities $38,000
Loans $0

In column 2, the bank's reserves have increased to $62,000, reflecting the funds from the cleared checks. The loans balance remains at $0 since the entire loan has been repaid.

I hope this explanation helps! Let me know if you have any further questions.