Question
National Bank currently has $1,350 million in transaction deposits on its balance sheet. The current reserve requirement is 12 percent, but the Federal Reserve is
National Bank currently has $1,350 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)Transaction depositsLoansReserve deposits at FedReserve accountsSecurities | $ million | (Click to select)SecuritiesReserve deposits at FedReserve accountsTransaction depositsLoans | $ million |
National Bank | |||
Assets | Liabilities | ||
(Click to select)Transaction depositsReserve accountsReserve deposits at FedLoansSecurities | $ million | (Click to select)Transaction depositsReserve deposits at FedLoansReserve accountsSecurities | $ million |
(Click to select)Reserve accountsSecuritiesTransaction depositsLoansReserve deposits at Fed | $ million | ||
Panel B: Balance sheet after all changes |
Federal Reserve Bank | |||
Assets | Liabilities | ||
(Click to select)Reserve deposits at FedLoansSecuritiesReserve accountsTransaction deposits | $ million | (Click to select)Reserve accountsLoansSecuritiesReserve deposits at FedTransaction deposits | $ million |
National Bank | |||
Assets | Liabilities | ||
(Click to select)Reserve accountsLoansTransaction depositsReserve deposits at FedSecurities | $ million | (Click to select)Reserve accountsLoansTransaction depositsReserve deposits at FedSecurities | $ million |
(Click to select)Reserve accountsReserve deposits at FedSecuritiesLoansTransaction deposits | $ million | ||
b. | Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 75 percent of its excess reserves to loans and borrowers return 60 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 FedReserve accountsSecurities | $ million | (Click to select)Transaction depositsSecuritiesLoansReserve accountsReserve deposits at Fed | $ million |
National Bank | |||
Assets | Liabilities | ||
(Click to select)SecuritiesLoansTransaction depositsReserve accountsReserve deposits at Fed | $ million | (Click to select)LoansSecuritiesReserve accountsTransaction depositsReserve deposits at Fed | $ million |
(Click to select)Reserve deposits at FedLoansSecuritiesReserve accountsTransaction deposits | $ million | ||
Panel B: Balance sheet after all changes |
Federal Reserve Bank | |||
Assets | Liabilities | ||
(Click to select)Reserve deposits at FedLoansTransaction depositsReserve accountsSecurities | $ million | (Click to select)Reserve deposits at FedSecuritiesReserve accountsLoansTransaction deposits | $ million |
National Bank | |||
Assets | Liabilities | ||
(Click to select)SecuritiesReserve accountsLoansReserve deposits at FedTransaction deposits | $ million | (Click to select)SecuritiesReserve deposits at FedLoansTransaction depositsReserve accounts | $ million |
(Click to select)LoansSecuritiesReserve deposits at FedReserve accountsTransaction deposits | $ million |
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