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National Bank currently has $750 million in transaction deposits on its balance sheet. The current reserve...

National Bank currently has $750 million in transaction deposits on its balance sheet. The current reserve requirement is 12 percent, but the Federal Reserve is decreasing this requirement to 10 percent.

a.

Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel B" answers to 3 decimal places. (e.g., 32.161))

Panel A: Initial balance sheets

Federal Reserve Bank
Assets		Liabilities
(Click to select)LoansReserve accountsReserve deposits at FedSecuritiesTransaction deposits	$ million	(Click to select)SecuritiesReserve accountsReserve deposits at FedLoansTransaction deposits	$ million

National Bank
Assets		Liabilities
(Click to select)Transaction depositsLoansSecuritiesReserve deposits at FedReserve accounts	$ million	(Click to select)Reserve accountsSecuritiesLoansTransaction depositsReserve deposits at Fed	$ million
(Click to select)Transaction depositsSecuritiesReserve deposits at FedLoansReserve accounts	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsLoansSecuritiesReserve accountsReserve deposits at Fed	$ million	(Click to select)Reserve deposits at FedTransaction depositsSecuritiesLoansReserve accounts	$ million

National Bank
Assets		Liabilities
(Click to select)LoansSecuritiesTransaction depositsReserve deposits at FedReserve accounts	$ million	(Click to select)Reserve deposits at FedTransaction depositsReserve accountsLoansSecurities	$ million
(Click to select)Reserve accountsReserve deposits at FedSecuritiesTransaction depositsLoans	$ million

b.

Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 70 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel B" answers to 3 decimal places. (e.g., 32.161))

Panel A: Initial balance sheets

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsSecuritiesReserve deposits at FedLoansReserve accounts	$ million	(Click to select)LoansTransaction depositsReserve accountsReserve deposits at FedSecurities	$ million

National Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve deposits at FedReserve accountsLoansSecurities	$ million	(Click to select)Transaction depositsLoansReserve deposits at FedSecuritiesReserve accounts	$ million
(Click to select)Reserve deposits at FedReserve accountsTransaction depositsSecuritiesLoans	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at FedLoansReserve accountsTransaction deposits	$ million	(Click to select)Reserve accountsLoansReserve deposits at FedTransaction depositsSecurities	$ million

National Bank
Assets		Liabilities
(Click to select)LoansReserve deposits at FedSecuritiesReserve accountsTransaction deposits	$ million	(Click to select)Reserve accountsTransaction depositsReserve deposits at FedLoansSecurities	$ million
(Click to select)Transaction depositsReserve deposits at FedLoansSecuritiesReserve accounts	$ million

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ekkarill92 answered 1 year ago

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