Assume that the Fed buys a $3,000 government security from Judy, who deposits the $3,000 in her checking account at the Last National Bank. (Assume that Last National's T-account balances start at zero before the deposit.) The Last National Bank puts $400 of this money in vault cash, and the remainder is deposited at the Fed. Assuming a required reserve ratio of 20% for all banks answer questions a, b, c and d.

a. Fill in the blanks in the balance sheet below for the Last National Bank.

Balance Sheet for Last National Bank

Assets Liabilities_________

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Legal Reserves 49. $______ | Demand Deposits 44. $ _____ _

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Vault cash 45. $ ___ | Judy 43.$______

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Deposits at Fed 46. $ ___ |

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Required Reserves 47. $ ____ |

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Excess Reserves 48. $ ____ |

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Loans $ 0 |

b. Assume that Rudy goes to the Last National Bank and gets a loan of $2400 in the form of a new checking account (demand deposit). What would this do to the values of the bank's assets and liabilities? Fill in the blanks below with your answers.

Balance Sheet for Last National Bank

Assets Liabilities_________

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Legal Reserves 57.________ | Demand Deposits 52.$ _______ _

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Vault cash 53. $ ____ | Judy 51.$ ______

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Deposits at Fed 54. $ ____ | Rudy 50.$ ______

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Required Reserves 55.$ _____ |

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Excess Reserves 56.$ _____ |

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Loans 58. $ _____ _ |