MHM Bank currently has $350 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)Reserve deposits at FedReserve accountsLoansTransaction depositsSecurities	$ million	(Click to select)LoansReserve accountsSecuritiesTransaction depositsReserve deposits at Fed	$ million

MHM Bank
Assets		Liabilities
(Click to select)SecuritiesLoansTransaction depositsReserve accountsReserve deposits at Fed	$ million	(Click to select)SecuritiesReserve deposits at FedLoansReserve accountsTransaction deposits	$ million
(Click to select)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsLoansSecuritiesReserve accountsReserve deposits at Fed	$ million	(Click to select)SecuritiesLoansReserve deposits at FedTransaction depositsReserve accounts	$ million

MHM Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedSecuritiesReserve accountsLoansTransaction deposits	$ million	(Click to select)LoansReserve deposits at FedReserve accountsTransaction depositsSecurities	$ million
(Click to select)Reserve deposits at FedReserve accountsSecuritiesLoansTransaction deposits	$ 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)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts	$ million

MHM Bank
Assets		Liabilities
(Click to select)Reserve accountsSecuritiesLoansReserve deposits at FedTransaction deposits	$ million	(Click to select)Reserve accountsReserve deposits at FedLoansSecuritiesTransaction deposits	$ million
(Click to select)SecuritiesReserve deposits at FedTransaction depositsLoansReserve accounts	$ million

Panel B: Balance sheet after all changes

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

MHM Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedLoansSecuritiesTransaction depositsReserve accounts	$ million	(Click to select)Reserve accountsSecuritiesTransaction depositsReserve deposits at FedLoans	$ million
(Click to select)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts	$ million