PART A:

PART B:

MHM Bank currently has $500 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 70 percent of these funds to MHM Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts 85 percent of its excess reserves to loans and borrowers return 90 percent of these funds to MHM Bank as transaction deposits. Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts all excess reserves to loans, but borrowers ret: percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions, Do not round intermediate calculation: your "Panel B" answers to 3 decimal places. (e.g., 32.161)) Panel B: Balance Sheet after All Changes Federal Reserve Bank Show the balance sheet of the Federal Reserve and MHM Bank if MHM Bank converts 85 percent of its excess reserves to loans and return 90 percent of these funds to MHM Bank as transaction deposits. (Enter your answers in millions. Do not round intermediate Round your "Panel B" answers to 3 decimal places. (e.9.,32.161) ) Panel B: Balance Sheet after All Changes Federal Reserve Bank