Question

In: Finance

National Bank currently has $450 million in transaction deposits on its balance sheet. The current reserve...

National Bank currently has $450 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.
b. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 percent of these funds to National Bank as transaction deposits.
  

Solutions

Expert Solution

Ans (a)

The balance sheet of the Federal Reserve and National Bank when National Bank converts all excess reserve to loans and borrower return 50% of these funds to National Bank as transaction deposits:

Ans (b)

The balance sheet of the Federal Reserve and National Bank when National Bank converts 75% of the excess reserve to loans and borrower return 60% of these funds to National Bank as transaction deposits:


Related Solutions

National Bank currently has $1,800 million in transaction deposits on its balance sheet. The current reserve...
National Bank currently has $1,800 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. panel A initial balance sheets: federal reserve bank: Assets:______ Millions Liabilities _____________ millions...
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...
Bank Three currently has $450 million in transaction deposits on its balance sheet. The Federal Reserve...
Bank Three currently has $450 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 6 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...
MHM Bank currently has $750 million in transaction deposits on its balance sheet. The current reserve...
MHM Bank currently has $750 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 60 percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel...
Bank Three currently has $650 million in transaction deposits on its balance sheet. The Federal Reserve...
Bank Three currently has $650 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 4 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...
Bank Three currently has $950 million in transaction deposits on its balance sheet. The Federal Reserve...
Bank Three currently has $950 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 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...
Bank Three currently has $850 million in transaction deposits on its balance sheet. The Federal Reserve...
Bank Three currently has $850 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 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...
BSW Bank currently has $800 million in transaction deposits on its balance sheet. The Federal Reserve...
BSW Bank currently has $800 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 5 percent, show the balance sheet of BSW and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume BSW withdraws all excess reserves and gives out loans, and that borrowers eventually return all of...
Bank Three currently has $800 million in transaction deposits on its balance sheet. The Federal Reserve...
Bank Three currently has $800 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 8 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...
Bank Three currently has $300 million in transaction deposits on its balance sheet. The Federal Reserve...
Bank Three currently has $300 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 6 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT