Bank Three currently has $550 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 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. b. Redo part (a) using a 10 percent reserve requirement.

Bank Three currently has $550 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 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. b. Redo part (a) using a 10 percent reserve requirement.

Bank Three currently has $550 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 6 percent of transaction deposits. a. If the Federal Reserve decreases the reserve requirement to 4 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. b. Redo part (a) using a 10 percent reserve requirement.

Redo part (a) using a 10 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
Securities	$33	million	Reserve accounts	$33	million
Bank Three
Assets			Liabilities
Loans		million	Transaction deposits		million
Reserve deposits at Fed		million
Panel B: Balance Sheet after All Changes
Federal Reserve Bank
Assets			Liabilities
Securities		million	Reserve accounts		million
Bank Three
Assets			Liabilities
Loans		million	Transaction deposits		million
Reserve deposits at Fed		million