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 c is 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. a. A decline in the discount rate prompts commercial banks to borrow an additional $2 billion from the Federal Reserve Banks. Show the new balance-sheet numbers in column 1 of each table. b. The Federal Reserve Banks sell $4 billion in securities to members of the public, who pay for the bonds with checks. Show the new balance-sheet figures in column 2 of each table. c. The Federal Reserve Banks buy $3 billion of securities from commercial banks. Show the new balance-sheet figures in column 3 of each table. Instructions: All answers below are to be entered as whole numbers.

CONSOLIDATED BALANCE SHEET: ALL COMMERCIAL BANKS
		(1)	(2)	(3)
Assets:
Reserves	$ 34	$	$	$
Securities	58
Loans	62
Liabilities and net worth:
Checkable deposits	$150	$		$
Loans from the Federal Reserve Banks	4

CONSOLIDATED BALANCE SHEET: TWELVE FEDERAL RESERVE BANKS
		(1)	(2)	(3)
Assets:
Securities	$60	$	$	$
Loans to commercial banks	4
Liabilities and net worth:
Reserves of commercial banks	$34	$	$	$
Treasury deposits	3
Federal Reserve Notes	27

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