Business, 18.02.2020 22:56 miajacobs110
Bank Three currently has $500 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 8 percent of transaction deposits.
a.
If the Federal Reserve decreases the reserve requirement to 5 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans, and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits. (Do not round intermediate calculations. Enter your answers in millions rounded to the nearest dollar amount.)
Panel A: Initial Balance Sheets
Federal Reserve Bank
Assets Liabilities
(Click to select)LoansReserve deposits at FedSecuritiesReserve accountsTransaction deposits $ million (Click to select)SecuritiesLoansReserve accountsTransaction depositsReserve deposits at Fed $ million
Bank Three
Assets Liabilities
(Click to select)LoansReserve accountsTransaction depositsReserve deposits at FedSecurities $ million (Click to select)Reserve deposits at FedReserve deposits $ million
(Click to select)Reserve deposits at accountsTransaction deposits million
Panel B: Balance Sheet after All Changes
Federal Reserve Bank
Assets Liabilities
(Click to select)Transaction deposits at FedReserve accounts $ million (Click to select)Reserve accountsReserve deposits at FedSecuritiesTransaction depositsLoans $ million
Bank Three
Assets Liabilities
(Click to select)LoansTransaction depositsReserve deposits at Fed $ million (Click to select)Reserve deposits at FedSecuritiesTransaction depositsLoansReserve accounts $ million
(Click to select)SecuritiesLoansReserve accountsTransaction depositsReserve deposits at Fed million
b.
Redo part (a) using a 10 percent reserve requirement. (Do not round intermediate calculations. Enter your answers in millions rounded to the nearest dollar amount.)
Panel A: Initial Balance Sheets
Federal Reserve Bank
Assets Liabilities
(Click to select)LoansSecuritiesReserve accountsReserve deposits at FedTransaction deposits $ million (Click to select)LoansTransaction depositsReserve deposits at FedSecuritiesReserve accounts $ million
Bank Three
Assets Liabilities
(Click to select)Reserve deposits at FedLoansReserve deposits $ million (Click to select)Reserve accountsTransaction depositsLoansReserve deposits at FedSecurities $ million
(Click to select)Reserve deposits at FedReserve accountsTransaction depositsLoansSecurities million
Panel B: Balance Sheet after All Changes
Federal Reserve Bank
Assets Liabilities
(Click to select)LoansTransaction deposits at FedReserve accounts $ million (Click to select)Reserve deposits at FedSecuritiesTransaction depositsLoansReserve accounts $ million
Bank Three
Assets Liabilities
(Click to select)Reserve deposits at accountsTransaction deposits $ million (Click to select)Transaction depositsReserve accountsReserve deposits at FedSecuritiesLoans $ million
(Click to select)Transaction accountsReserve deposits at FedLoans million
Answers: 1
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