MHM Bank currently has $300 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is increasing this requirement to 10 percent. a. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers return only 70 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts 80 percent of its excess reserves to loans and borrowers return 85 percent of these funds to MHM Bank as transaction deposits.

Panel A: Initial Balance Sheets
Federal Reserve Bank
Assets			Liabilities
		million			million
MHM Bank
Assets			Liabilities
		million			million
		million
Panel B: Balance Sheet after All Changes
Federal Reserve Bank
Assets			Liabilities
		million			million
MHM Bank
Assets			Liabilities
		million			million
		million