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Question 11. [8pts] Kentar Bank currently has $350 million in transactions deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement
Question 11. [8pts] Kentar Bank currently has $350 million in transactions deposits on its balance sheet. The Federal Reserve has currently set the reserve requirement at 10% of transaction deposits. a. If the Federal Reserve decreases the reserve requirements to 5%, show the balance sheet of Kentar Bank and the Federal Reserve System just before and after the full effect of the reserve requirement change. Assume Kentar Bank withdraws all excess reserves and gives out loans and that borrowers eventually return all of these funds to Kentar Bank in the form of transaction deposits. b. Redo part (a) using a 15% reserve requirement. (Show your calculations)
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