BSW Bank currently has $750 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)SecuritiesReserve deposits at FedTransaction depositsReserve accountsLoans	$ million	(Click to select)SecuritiesReserve accountsTransaction depositsLoansReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)SecuritiesTransaction depositsReserve accountsReserve deposits at FedLoans	$ million	(Click to select)SecuritiesTransaction depositsLoansReserve deposits at FedReserve accounts	$ million
(Click to select)SecuritiesTransaction depositsLoansReserve deposits at FedReserve accounts	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)LoansTransaction depositsSecuritiesReserve accountsReserve deposits at Fed	$ million	(Click to select)Reserve accountsLoansReserve deposits at FedSecuritiesTransaction deposits	$ million

BSW Bank
Assets		Liabilities
(Click to select)LoansReserve accountsReserve deposits at FedSecuritiesTransaction deposits	$ million	(Click to select)Transaction depositsReserve deposits at FedLoansSecuritiesReserve accounts	$ million
(Click to select)Transaction depositsLoansReserve accountsSecuritiesReserve 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 deposits at FedTransaction depositsReserve accountsSecurities	$ million	(Click to select)Transaction depositsReserve deposits at FedReserve accountsSecuritiesLoans	$ million

BSW Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve accountsReserve deposits at FedSecuritiesLoans	$ million	(Click to select)SecuritiesLoansReserve deposits at FedTransaction depositsReserve accounts	$ million
(Click to select)Transaction depositsSecuritiesReserve deposits at FedReserve accountsLoans	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsSecuritiesLoansReserve accountsReserve deposits at Fed	$ million	(Click to select)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts	$ million

BSW Bank
Assets		Liabilities
(Click to select)SecuritiesTransaction depositsLoansReserve deposits at FedReserve accounts	$ million	(Click to select)Transaction depositsReserve accountsLoansSecuritiesReserve deposits at Fed	$ million
(Click to select)LoansTransaction depositsReserve accountsReserve deposits at FedSecurities	million