Brown Bank currently has $350 million in transaction deposits on its balance sheet. The current reserve requirement is 10 percent, but the Federal Reserve is increasing this requirement to 11 percent. (LG 4-3)

a. Show the balance sheet of the Federal Reserve and Brown Bank if Brown Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to Brown Bank as transaction deposits.

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

AppendixLO1