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National Bank currently has $1,400 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is

National Bank currently has $1,400 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is decreasing this requirement to 6 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)Reserve accountsReserve deposits at FedSecuritiesTransaction depositsLoans $ million (Click to select)Transaction depositsReserve deposits at FedReserve accountsSecuritiesLoans $ million

National Bank
Assets Liabilities
(Click to select)Reserve accountsSecuritiesLoansReserve deposits at FedTransaction deposits $ million (Click to select)SecuritiesReserve deposits at FedLoansTransaction depositsReserve accounts $ million
(Click to select)Reserve deposits at FedReserve accountsSecuritiesLoansTransaction deposits $ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets Liabilities
(Click to select)Transaction depositsReserve accountsLoansReserve deposits at FedSecurities $ million (Click to select)LoansReserve accountsTransaction depositsSecuritiesReserve deposits at Fed $ million

National Bank
Assets Liabilities
(Click to select)Reserve deposits at FedSecuritiesLoansReserve accountsTransaction deposits $ million (Click to select)Reserve deposits at FedLoansTransaction depositsReserve accountsSecurities $ million
(Click to select)Transaction depositsReserve accountsLoansReserve deposits at FedSecurities $ 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 70 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)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts $ million (Click to select)Reserve accountsTransaction depositsLoansReserve deposits at FedSecurities $ million

National Bank
Assets Liabilities
(Click to select)Reserve deposits at FedLoansReserve accountsSecuritiesTransaction deposits $ million (Click to select)Reserve deposits at FedLoansTransaction depositsSecuritiesReserve accounts $ million
(Click to select)Reserve deposits at FedLoansReserve accountsTransaction depositsSecurities $ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets Liabilities
(Click to select)Reserve deposits at FedSecuritiesLoansTransaction depositsReserve accounts $ million (Click to select)LoansSecuritiesReserve deposits at FedReserve accountsTransaction deposits $ million

National Bank
Assets Liabilities
(Click to select)SecuritiesLoansReserve accountsReserve deposits at FedTransaction deposits $ million (Click to select)Reserve accountsTransaction depositsLoansSecuritiesReserve deposits at Fed $ million
(Click to select)SecuritiesReserve accountsLoansTransaction depositsReserve deposits at Fed $ million

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