MHM Bank currently has $700 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 60 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 FedTransaction depositsReserve accountsSecuritiesLoans	$ million	(Click to select)Reserve accountsLoansTransaction depositsReserve deposits at FedSecurities	$ million

MHM Bank
Assets		Liabilities
(Click to select)Reserve accountsTransaction depositsLoansSecuritiesReserve deposits at Fed	$ million	(Click to select)Reserve accountsLoansReserve deposits at FedTransaction depositsSecurities	$ million
(Click to select)Reserve accountsSecuritiesReserve deposits at FedTransaction depositsLoans	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Reserve accountsReserve deposits at FedSecuritiesTransaction depositsLoans	$ million	(Click to select)Reserve accountsTransaction depositsLoansSecuritiesReserve deposits at Fed	$ million

MHM Bank
Assets		Liabilities
(Click to select)LoansTransaction depositsReserve accountsSecuritiesReserve deposits at Fed	$ million	(Click to select)Transaction depositsSecuritiesReserve accountsReserve deposits at FedLoans	$ million
(Click to select)Reserve accountsSecuritiesLoansReserve deposits at FedTransaction deposits	$ million

b.

Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts 75 percent of its excess reserves to loans and borrowers return 80 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)SecuritiesLoansReserve deposits at FedReserve accountsTransaction deposits	$ million	(Click to select)Transaction depositsReserve accountsSecuritiesLoansReserve deposits at Fed	$ million

MHM Bank
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at FedTransaction depositsReserve accountsLoans	$ million	(Click to select)Reserve deposits at FedSecuritiesTransaction depositsReserve accountsLoans	$ million
(Click to select)Transaction depositsReserve accountsLoansSecuritiesReserve deposits at Fed	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsLoansReserve deposits at FedSecuritiesReserve accounts	$ million	(Click to select)SecuritiesLoansReserve deposits at FedReserve accountsTransaction deposits	$ million

MHM Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve deposits at FedReserve accountsLoansSecurities	$ million	(Click to select)Reserve accountsReserve deposits at FedSecuritiesTransaction depositsLoans	$ million
(Click to select)Reserve deposits at FedReserve accountsTransaction depositsLoansSecurities