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. (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
(Click to select)LoansSecuritiesReserve deposits at FedTransaction depositsReserve accounts	$ million	(Click to select)LoansSecuritiesTransaction depositsReserve deposits at FedReserve accounts	$ million

MHM Bank
Assets		Liabilities
(Click to select)LoansSecuritiesReserve accountsReserve deposits at FedTransaction deposits	$ million	(Click to select)SecuritiesLoansReserve deposits at FedTransaction depositsReserve accounts	$ million
(Click to select)Reserve deposits at FedSecuritiesLoansReserve accountsTransaction deposits	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)LoansSecuritiesReserve deposits at FedReserve accountsTransaction deposits	$ million	(Click to select)SecuritiesReserve accountsReserve deposits at FedLoansTransaction deposits	$ million

MHM Bank
Assets		Liabilities
(Click to select)LoansReserve accountsTransaction depositsReserve deposits at FedSecurities	$ million	(Click to select)Reserve deposits at FedSecuritiesTransaction depositsLoansReserve accounts	$ million
(Click to select)Reserve deposits at FedSecuritiesTransaction depositsLoansReserve accounts	$ million

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. (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
(Click to select)LoansTransaction depositsSecuritiesReserve deposits at FedReserve accounts	$ million	(Click to select)Reserve deposits at FedSecuritiesTransaction depositsReserve accountsLoans	$ million

MHM Bank
Assets		Liabilities
(Click to select)Transaction depositsLoansReserve accountsReserve deposits at FedSecurities	$ million	(Click to select)SecuritiesTransaction depositsReserve accountsLoansReserve deposits at Fed	$ million
(Click to select)SecuritiesReserve deposits at FedReserve accountsLoansTransaction deposits	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)LoansReserve accountsReserve deposits at FedTransaction depositsSecurities	$ million	(Click to select)Transaction depositsReserve accountsSecuritiesLoansReserve deposits at Fed	$ million

MHM Bank
Assets		Liabilities
(Click to select)SecuritiesTransaction depositsLoansReserve accountsReserve deposits at Fed	$ million	(Click to select)Reserve accountsSecuritiesLoansTransaction depositsReserve deposits at Fed	$ million
(Click to select)Reserve deposits at FedTransaction depositsReserve accountsSecuritiesLoans	$ million