Question
HEARTfelt Bank currently has $250 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 8 percent
HEARTfelt Bank currently has $250 million in transaction deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 8 percent of transaction deposits. 1. Show the HEARTfelt Bank and Federal Reserve before there is a change in reserve requirements. 2. Now assume the Fed changes reserve requirement to 7%. Assume HEARTfelt withdraws all excess reserves and gives out loans and assume that borrowers eventually return 90% of the funds to HEARTfelt in the form of transaction depositions.
Show the new balance sheet of HEARTfelt and the Fed.
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