National Bank currently has $1,200 million in transaction deposits on its balance sheet. The current reserve requirement is 12 percent, but the Federal Reserve is decreasing this requirement to 10 percent.

a.

Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National 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 depositsReserve deposits at FedSecuritiesReserve accounts	$ million	(Click to select)SecuritiesLoansTransaction depositsReserve accountsReserve deposits at Fed	$ million

National Bank
Assets		Liabilities
(Click to select)Transaction depositsSecuritiesLoansReserve accountsReserve deposits at Fed	$ million	(Click to select)Reserve deposits at FedLoansTransaction depositsSecuritiesReserve accounts	$ million
(Click to select)Reserve deposits at FedLoansReserve accountsSecuritiesTransaction deposits	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)Transaction depositsLoansReserve deposits at FedReserve accountsSecurities	$ million	(Click to select)Reserve accountsLoansSecuritiesReserve deposits at FedTransaction deposits	$ million

National Bank
Assets		Liabilities
(Click to select)Reserve accountsReserve deposits at FedTransaction depositsSecuritiesLoans	$ million	(Click to select)Reserve accountsTransaction depositsSecuritiesLoansReserve deposits at Fed	$ million
(Click to select)SecuritiesReserve deposits at FedTransaction depositsLoansReserve accounts	$ million

b.

Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 90 percent of its excess reserves to loans and borrowers return 80 percent of these funds to National 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 accountsLoansReserve deposits at FedTransaction depositsSecurities	$ million	(Click to select)LoansReserve accountsReserve deposits at FedTransaction depositsSecurities	$ million

National Bank
Assets		Liabilities
(Click to select)SecuritiesLoansReserve accountsReserve deposits at FedTransaction deposits	$ million	(Click to select)Transaction depositsReserve deposits at FedSecuritiesReserve accountsLoans	$ million
(Click to select)Reserve accountsLoansTransaction depositsSecuritiesReserve deposits at Fed	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)SecuritiesTransaction depositsReserve accountsReserve deposits at FedLoans	$ million	(Click to select)Reserve deposits at FedSecuritiesReserve accountsLoansTransaction deposits	$ million

National Bank
Assets		Liabilities
(Click to select)SecuritiesReserve deposits at FedReserve accountsLoansTransaction deposits	$ million	(Click to select)Transaction depositsReserve accountsSecuritiesReserve deposits at FedLoans	$ million
(Click to select)Transaction depositsReserve deposits at FedLoansSecuritiesReserve accounts	$ million