BSW Bank currently has $350 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 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 deposits at FedTransaction depositsSecuritiesReserve accountsLoans	$ million	(Click to select)Reserve deposits at FedSecuritiesReserve accountsTransaction depositsLoans	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve accountsTransaction depositsLoansSecuritiesReserve deposits at Fed	$ million	(Click to select)LoansSecuritiesReserve accountsTransaction depositsReserve deposits at Fed	$ million
(Click to select)Reserve accountsLoansSecuritiesTransaction depositsReserve deposits at Fed	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve accountsSecuritiesLoansReserve deposits at FedTransaction deposits	$ million	(Click to select)SecuritiesLoansTransaction depositsReserve accountsReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve accountsSecuritiesLoansReserve deposits at Fed	$ million	(Click to select)SecuritiesTransaction depositsReserve accountsLoansReserve deposits at Fed	$ million
(Click to select)SecuritiesReserve accountsLoansReserve deposits at FedTransaction deposits	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)Reserve accountsSecuritiesTransaction depositsLoansReserve deposits at Fed	$ million	(Click to select)Transaction depositsReserve deposits at FedSecuritiesLoansReserve accounts	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedTransaction depositsLoansSecuritiesReserve accounts	$ million	(Click to select)Transaction depositsReserve accountsSecuritiesReserve deposits at FedLoans	$ million
(Click to select)LoansReserve accountsSecuritiesTransaction depositsReserve deposits at Fed	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedTransaction depositsSecuritiesLoansReserve accounts	$ million	(Click to select)SecuritiesTransaction depositsReserve accountsLoansReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)SecuritiesReserve accountsTransaction depositsReserve deposits at FedLoans	$ million	(Click to select)Reserve accountsSecuritiesReserve deposits at FedTransaction depositsLoans	$ million
(Click to select)LoansTransaction depositsReserve accountsReserve deposits at FedSecurities	million