Assume that in a country the total holdings of banks were as follows: Bank Amount in million dollars Required Reserve $45 Excess Reserve $15 Deposits $750 Loans $600 Treasury Bonds $90

a) Show that the balance sheet balances if these are the only assets and liabilities.

b) Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks do not change their holdings of Treasury bonds?

c) How much does the money supply change by?

4) Complete the following in 450-500 word essay. As an assistant quantitative analyst for this bank, what can you assume from these results? What recommendations can you provide to your senior manager on loan rates, depending on the Federal Reserve System's ratio percentage? What should the bank do when the Fed raises the discount rate and the Federal Funds Rate? What should the bank do when the Fed increases and decreases the reserve ratio to change the reserve requirement?