National Bank currently has $1,950 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)Reserve deposits at FedLoansReserve accountsSecuritiesTransaction deposits	$ million	(Click to select)SecuritiesReserve accountsTransaction depositsLoansReserve deposits at Fed	$ million

National Bank
Assets		Liabilities
(Click to select)Reserve deposits at FedReserve accountsTransaction depositsSecuritiesLoans	$ million	(Click to select)SecuritiesLoansReserve accountsReserve deposits at FedTransaction deposits	$ million
(Click to select)LoansTransaction depositsReserve deposits at FedSecuritiesReserve accounts	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)SecuritiesReserve accountsLoansReserve deposits at FedTransaction deposits	$ million	(Click to select)LoansReserve deposits at FedTransaction depositsSecuritiesReserve accounts	$ million

National Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve accountsSecuritiesReserve deposits at FedLoans	$ million	(Click to select)Reserve accountsReserve deposits at FedTransaction depositsLoansSecurities	$ million
(Click to select)LoansSecuritiesTransaction depositsReserve deposits at FedReserve 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)LoansTransaction depositsReserve accountsReserve deposits at FedSecurities	$ million	(Click to select)Reserve accountsTransaction depositsLoansSecuritiesReserve deposits at Fed	$ million

National Bank
Assets		Liabilities
(Click to select)LoansTransaction depositsReserve deposits at FedReserve accountsSecurities	$ million	(Click to select)Transaction depositsReserve deposits at FedSecuritiesLoansReserve accounts	$ million
(Click to select)Transaction depositsReserve accountsReserve deposits at FedLoansSecurities	$ million

Panel B: Balance sheet after all changes

Federal Reserve Bank
Assets		Liabilities
(Click to select)LoansReserve accountsTransaction depositsSecuritiesReserve deposits at Fed	$ million	(Click to select)LoansSecuritiesTransaction depositsReserve deposits at FedReserve accounts	$ million

National Bank
Assets		Liabilities
(Click to select)Transaction depositsReserve deposits at FedLoansSecuritiesReserve accounts	$ million	(Click to select)Reserve deposits at FedSecuritiesReserve accountsLoansTransaction deposits	$ million
(Click to select)LoansTransaction depositsReserve accountsReserve deposits at FedSecurities	$ million