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Given panel A, complete Panel B. National Bank currently has $1,750 million in transaction deposits on its balance sheet. The current reserve requirement is 8
Given panel A, complete Panel B.
National Bank currently has $1,750 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is decreasing this requirement to 6 percent.
a. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate calculations. Round your "Panel B" answers to 3 decimal places. (e.g., 32.161)) Panel A: Initial balance sheets Federal Reserve Bank Assets Liabilities Securities 140 million Reserve accounts 140 million National Bank Assets Liabilities Loans 1,610 million Transaction deposits 1750 million Reserve deposits at Fed 140 million Panel B: Balance sheet after all changes Federal Reserve Bank Assets Liabilities Securities milionReerve accounts million National Bank Assets Liabilities Loans million Transaction deposits million Reserve deposits at Fed millionStep by Step Solution
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