BSW Bank currently has $450 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10 percent of transaction deposits.

a.

If the Federal Reserve decreases the reserve requirement to 6 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)SecuritiesLoansReserve accountsReserve deposits at FedTransaction deposits	$ million	(Click to select)Reserve accountsSecuritiesReserve deposits at FedLoansTransaction deposits	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve accountsTransaction depositsLoansReserve deposits at FedSecurities	$ million	(Click to select)Transaction depositsLoansReserve accountsReserve deposits at FedSecurities	$ million
(Click to select)Transaction depositsSecuritiesLoansReserve accountsReserve deposits at Fed	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedSecuritiesTransaction depositsReserve accountsLoans	$ million	(Click to select)Reserve deposits at FedTransaction depositsReserve accountsSecuritiesLoans	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedLoansTransaction depositsReserve accountsSecurities	$ million	(Click to select)Reserve accountsTransaction depositsSecuritiesReserve deposits at FedLoans	$ million
(Click to select)Reserve accountsTransaction depositsSecuritiesLoansReserve deposits at Fed	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)Reserve accountsTransaction depositsLoansSecuritiesReserve deposits at Fed	$ million	(Click to select)Reserve accountsSecuritiesLoansTransaction depositsReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)LoansReserve accountsTransaction depositsReserve deposits at FedSecurities	$ million	(Click to select)Reserve accountsLoansReserve deposits at FedTransaction depositsSecurities	$ million
(Click to select)SecuritiesLoansTransaction depositsReserve deposits at FedReserve accounts	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedSecuritiesTransaction depositsLoansReserve accounts	$ million	(Click to select)Transaction depositsReserve deposits at FedSecuritiesReserve accountsLoans	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedSecuritiesReserve accountsLoansTransaction deposits	$ million	(Click to select)Transaction depositsReserve accountsSecuritiesLoansReserve deposits at Fed	$ million
(Click to select)Reserve accountsTransaction depositsSecuritiesReserve deposits at FedLoans	million