3. Beleaguered State Bank (BSB) holds $250 million in deposits and maintains a reserve ratio of 10 percent. a. Show a T-account for BSB. b. Now suppose that BSB's largest depositor withdraws $10 million in cash from her account and that BSB decides to restore its reserve ratio by reducing the amount of loans outstanding. Show its new T-account. c. Explain what effect BSB's action will have on other banks. d. Why might it be difficult for BSB to take the action described in part (b)? Discuss another way for BSB to return to its original reserve ratio. Answer: a. Beleaguered State Bank Assets Liabilities b. Beleaguered State Bank Assets Liabilities I d States 9 Focus 5. Suppose the Federal Reserve's trading desk buys $500,000 in T-bills from a securities dealer who then deposits the Fed's check in Best National Bank. Use a balance sheet to show the impact on the bank's loans. Consider the money multiplier and assume the required reserve ratio is 10 per-cent. What is the maximum increase in the money supply that can result from this open market transaction? Answer: Best National Bank Assets Liabilities