BSW Bank currently has $100 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 4 percent, show the balance sheet of BSW and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume BSW withdraws all excess reserves and gives out loans, and that borrowers eventually return all of these funds to BSW 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)Reserve accountsTransaction depositsLoansReserve deposits at FedSecurities	$ million	(Click to select)LoansTransaction depositsSecuritiesReserve accountsReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)LoansReserve deposits at FedTransaction depositsReserve accountsSecurities	$ million	(Click to select)SecuritiesLoansReserve deposits at FedReserve accountsTransaction deposits	$ million
(Click to select)Transaction depositsReserve deposits at FedReserve accountsSecuritiesLoans	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at FedReserve accountsTransaction depositsLoans	$ million	(Click to select)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts	$ million

BSW Bank
Assets		Liabilities
(Click to select)Transaction depositsSecuritiesReserve deposits at FedLoansReserve accounts	$ million	(Click to select)LoansReserve accountsReserve deposits at FedTransaction depositsSecurities	$ million
(Click to select)SecuritiesLoansReserve accountsTransaction depositsReserve deposits at Fed	million

b.	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
(Click to select)LoansReserve accountsReserve deposits at FedTransaction depositsSecurities	$ million	(Click to select)SecuritiesTransaction depositsReserve deposits at FedReserve accountsLoans	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve accountsTransaction depositsLoansReserve deposits at FedSecurities	$ million	(Click to select)Reserve deposits at FedSecuritiesLoansReserve accountsTransaction deposits	$ million
(Click to select)LoansReserve accountsSecuritiesReserve deposits at FedTransaction deposits	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)LoansReserve deposits at FedTransaction depositsReserve accountsSecurities	$ million	(Click to select)Reserve deposits at FedReserve accountsSecuritiesLoansTransaction deposits	$ million

BSW Bank
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at FedLoansReserve accountsTransaction deposits	$ million	(Click to select)SecuritiesLoansReserve accountsTransaction depositsReserve deposits at Fed	$ million
(Click to select)LoansReserve deposits at FedSecuritiesReserve accountsTransaction deposits	million