exercise utilizes two balance sheets, one for the Federal Reserve and one for Bank of America, a representative member of the banking system.

In January 2021, the Fed issued a statement saying it "will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month."

Note that Treasury securities are also called Treasury bonds. Note too that agency mortgage-backed securities are labeled as "other bonds" in the following balan sheet of the Fed. Assuming that Bank of America is the only bank that is going to undertake these transactions with the Federal Reserve, show how the Fed's as well as Bank of America's balance sheet will change. (In practice, the Fed would buy these bonds from many banks, but for the purpose of this exercise, assume t the Fed buys both the Treasury securities and the agency mortgage-backed securities- other bonds- exclusively from Bank of America.)

Given the following balance sheet showing the Fed's initial position, suppose the Federal Reserve increases its holdings of Treasury securities by $80 billion and increases its holdings of agency mortgage-backed securities by $50 billion.

Assets

Federal Reserve Bank System (A// values in billions of dollars)

Liabilities and Shareholders' Equity

Treasury Bonds

Other bonds

8,000

2,000

Reserves

Currency

7,500

2,500

Total Assets

10,000

Total Liabilities

10,000

After the transaction is completed, show how the Fed's balance sheet will look. (You must enter six integer values, one for each balance sheet item.)

Assets

Federal Reserve Bank System (A/I values in billions of dollars)

Liabilities and Shareholders' Equity

Treasury Bonds

Other bonds

Reserves

Currency

Total Assets

Total Liabilities

This exercise utilizes two balance sheets, one for the Federal Reserve and one for Bank of America, a representative member of the banking system. In January 2021, the Fed issued a statement saying it "will continue to increase its holdings of Treasury securities by at least s80 billion per month and of agency mortgage-backed securities by at least $40 balion per month," Note that Treasury securities are atso called Treasury bonds. Note too that agency mortgage-backed securities are labeled as "other bonds" in the following balance sheet of the Fed. Assuming that Bank of America is the only bank that is going to undertake these transactions with the Federal Reserve, show how the Fed's as well as Bank of America's balance sheet will change. (In practice, the Fed would buy these bonds from many banks, but for the purpose of this exereise, assume that the Fed buys both the Treasury securities and the agency mortgage-backed securities-other bonds-exclusively from Bank of America.) Given the following balance sheet showing the Fed's initial position, suppose the Federal Reserve increases its holdings of Treasury securities by $80 bilion and increases its holdings of agency mortgage-backed securities by $50 billion. After the transaction is completed, show how the Fed's balance sheet will look. (You must enter six integer values, one for each balance sheet itom.) Federal Reserve Bank System (All values in billions of dollars)