[A Look at Money, Inflation and the Fed] The reserve requirement in the United States is 10%. Lion Bank has deposits of $12 million and keeps its reserves as low as possible. Lion Bank has $3 million in government bonds and has loaned out the remainder of its asses (that which is not kept as reserves). Valere Bank has deposits of $7 million. It also keeps reserves as low as possible, and has loaned out $3.2 million. The rest of its assets (again, that which is not kept as reserves) is held in government bonds. a. Fill in the Balance sheet table below for both banks Lion Bank: Valere Bank: b. Now suppose the Fed purchases $2 million worth of government bonds from Lion Bank. Suppose Lion Bank does not make any adjustments to its reserves. Depict its balance sheet immediately after the Fed's purchase. Assets Liabilities Loans Bonds Reserves Deposits Assets Liabilities Assets Liabilities c. Now suppose Lion Bank adjusts its loans such that it is once again holding the minimum allowed amount of currency in reserves. To do so it lends out the money to Bell Industries. How much would it lend? Depict Lion Bank's balance sheet. d. Suppose Bell Industries uses all the loan to purchase a very expense machine produced by Widgets Inc. Next, Widgets Inc. deposits all the money at Valere Bank. Show Valere Bank's new balance sheet immediately after Widgets Inc. deposits the money (before it changes its reserves). Now suppose Valere adjusts its reserves to be at the minimum again by increasing lending. How much would it lend out? Depict its balance sheet after it adjusts its reserves to be at the minimum. e. What would the total increase be in deposits, in the overall economy?