Bank Three currently has $300 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 8 percent of transaction deposits.

a.

If the Federal Reserve decreases the reserve requirement to 6 percent, show the balance sheet of Bank Three and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Bank Three withdraws all excess reserves and gives out loans, and that borrowers eventually return all of these funds to Bank Three in the form of transaction deposits. (Do not round intermediate calculations. Enter your answers in millions rounded to the nearest dollar amount.)

Panel A: Initial Balance Sheets

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve accountsLoansSecuritiesReserve deposits at fed	$ million	(Click to select)LoansReserve deposits at fedTransaction depositsSecuritiesReserve accounts	$ million

Bank Three
Assets		Liabilities
(Click to select)Transaction depositsReserve accountsLoansSecuritiesReserve deposits at fed	$ million	(Click to select)Reserve accountsSecuritiesReserve deposits at fedLoansTransaction deposits	$ million
(Click to select)Reserve accountsTransaction depositsSecuritiesReserve deposits at fedLoans	million

Panel B: Balance Sheet after All Changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve deposits at fedTransaction depositsReserve accountsSecuritiesLoans	$ million	(Click to select)Transaction depositsReserve deposits at fedReserve accountsLoansSecurities	$ million

Bank Three
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at fedLoansReserve accountsTransaction deposits	$ million	(Click to select)Reserve deposits at fedReserve accountsTransaction depositsSecuritiesLoans	$ million
(Click to select)Transaction depositsLoansReserve accountsReserve deposits at fedSecurities	million

b.	Redo part (a) using a 12 percent reserve requirement. (Do not round intermediate calculations. Enter your answers in millions rounded to the nearest dollar amount.)

Panel A: Initial Balance Sheets

Federal Reserve Bank
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at fedReserve accountsTransaction depositsLoans	$ million	(Click to select)Reserve deposits at fedReserve accountsSecuritiesLoansTransaction deposits	$ million

Bank Three
Assets		Liabilities
(Click to select)Transaction depositsReserve deposits at fedLoansSecuritiesReserve accounts	$ million	(Click to select)LoansReserve deposits at fedTransaction depositsSecuritiesReserve accounts	$ million
(Click to select)Reserve deposits at fedSecuritiesTransaction depositsLoansReserve accounts	million

Panel B: Balance Sheet after All Changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve accountsReserve deposits at fedSecuritiesLoansTransaction deposits	$ million	(Click to select)Reserve accountsTransaction depositsReserve deposits at fedSecuritiesLoans	$ million

Bank Three
Assets		Liabilities
(Click to select)Reserve deposits at fedLoansTransaction depositsReserve accountsSecurities	$ million	(Click to select)SecuritiesReserve deposits at fedReserve accountsLoansTransaction deposits	$ million
(Click to select)Reserve accountsLoansTransaction depositsReserve deposits at fedSecurities	million