BSW Bank 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 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 accountsReserve deposits at FedSecuritiesLoansTransaction deposits	$ million	(Click to select)Reserve accountsSecuritiesTransaction depositsLoansReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve accountsSecuritiesReserve deposits at FedTransaction depositsLoans	$ million	(Click to select)SecuritiesReserve deposits at FedTransaction depositsLoansReserve accounts	$ million
(Click to select)Reserve accountsReserve deposits at FedLoansSecuritiesTransaction deposits	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedReserve accountsTransaction depositsLoansSecurities	$ million	(Click to select)Transaction depositsSecuritiesLoansReserve deposits at FedReserve accounts	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve accountsReserve deposits at FedSecuritiesLoansTransaction deposits	$ million	(Click to select)SecuritiesReserve accountsLoansTransaction depositsReserve deposits at Fed	$ million
(Click to select)Reserve accountsLoansSecuritiesTransaction 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)SecuritiesTransaction depositsReserve deposits at FedLoansReserve accounts	$ million	(Click to select)Reserve deposits at FedReserve accountsSecuritiesLoansTransaction deposits	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve accountsLoansTransaction depositsSecuritiesReserve deposits at Fed	$ million	(Click to select)SecuritiesLoansReserve deposits at FedReserve accountsTransaction deposits	$ million
(Click to select)LoansReserve deposits at FedReserve accountsTransaction depositsSecurities	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)SecuritiesReserve accountsTransaction depositsReserve deposits at FedLoans	$ million	(Click to select)Reserve deposits at FedLoansReserve accountsTransaction depositsSecurities	$ million

BSW Bank
Assets		Liabilities
(Click to select)SecuritiesLoansReserve accountsReserve deposits at FedTransaction deposits	$ million	(Click to select)SecuritiesReserve deposits at FedLoansTransaction depositsReserve accounts	$ million
(Click to select)SecuritiesLoansReserve deposits at FedReserve accountsTransaction deposits	million