In the tables that follow you will find consolidated balance sheets for the commercial banking system and the 12 Federal Reserve Banks. Use columns 1 through 3 to indicate how the balance sheets would read after each of transactions a to cis completed. Do not cumulate your answers, that is, analyze each transaction separately, starting in each case from the numbers provided. All accounts are in billions of dollars Instructions: Enter your answers as a whole number. Consolidated Balance Sheet: All Commercial Banks 38 Assets: Reserves Securities Loans Liabilities and net worth: $33 60 60 Checkable deposits $150 Loans from the Federal Reserve Banks 3 Consolidated Balance Sheet: 12 Federal Reserve Banks Assets: Securities Loans to commercial banks $60 3 Liabilities and net worth: Reserves of commercial banks $33 Treasury deposits 3 Federal Reserve Notes 27 2 a A decline in the discount rate prompts commercial banks to borrow an additional $3 billion from the Federal Reserve Banks, Show the new balance sheet numbers in column 1 of each table b. The Federal Reserve Banks sell $5 billion in securities to members of the public, who pay for the bonds with checks. Show the new balance sheet numbers in column 2 of each table. c. The Federal Reserve Banks buy $4 billion of securities from commercial banks. Show the new balance sheet numbers in column 3 of each table d. Now review each of the above three transactions, asking yourself these three questions: (1) What change, if any, took place in the money supply as a direct and immediate result of each transaction? (2) What increase or decrease in the commercial banks reserves took place in each transaction? (3) Assuming a reserve ratio of 20 percent, what change in the money-creating potential of the commercial banking system occurred as a result of each transaction?