BSW Bank currently has $800 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 5 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 depositsLoansReserve accountsSecurities	$ million	(Click to select)LoansSecuritiesTransaction depositsReserve accountsReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedSecuritiesLoansReserve accountsTransaction deposits	$ million	(Click to select)LoansSecuritiesTransaction depositsReserve deposits at FedReserve accounts	$ million
(Click to select)Reserve accountsReserve deposits at FedSecuritiesTransaction depositsLoans	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedReserve accountsLoansSecuritiesTransaction deposits	$ million	(Click to select)Reserve deposits at FedReserve accountsSecuritiesTransaction depositsLoans	$ million

BSW Bank
Assets		Liabilities
(Click to select)SecuritiesLoansTransaction depositsReserve accountsReserve deposits at Fed	$ million	(Click to select)Reserve deposits at FedLoansSecuritiesTransaction depositsReserve accounts	$ million
(Click to select)LoansReserve deposits at FedReserve accountsSecuritiesTransaction deposits	million

b.	Redo part (a) using a 8 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 accountsSecuritiesReserve deposits at FedTransaction deposits	$ million	(Click to select)LoansTransaction depositsSecuritiesReserve accountsReserve deposits at Fed	$ million

BSW Bank
Assets		Liabilities
(Click to select)LoansReserve deposits at FedSecuritiesReserve accountsTransaction deposits	$ million	(Click to select)Reserve deposits at FedSecuritiesLoansReserve accountsTransaction deposits	$ million
(Click to select)Transaction depositsReserve deposits at FedSecuritiesLoansReserve accounts	million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve deposits at FedLoansSecuritiesReserve accounts	$ million	(Click to select)Reserve accountsReserve deposits at FedSecuritiesLoansTransaction deposits	$ million

BSW Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedReserve accountsSecuritiesLoansTransaction deposits	$ million	(Click to select)Reserve deposits at FedSecuritiesLoansTransaction depositsReserve accounts	$ million
(Click to select)Reserve deposits at FedLoansTransaction depositsReserve accountsSecurities	million