Question
Suppose the Fed sells $55 billion worth of Treasury bonds to Barclays. Complete the following table showing the balance sheet of Barclays before and after
Suppose the Fed sells $55 billion worth of Treasury bonds to Barclays.
Complete the following table showing the balance sheet of Barclays before and after this sale.
Balance sheet of Barclays
Before | Assets | Liabilities and Shareholder's Equity | ||
Reserves: | $150 billion | Deposits and otherliabilities: | $900 billion | |
Bonds and otherinvestments: | $850 billion | Shareholder's equity: | $100 billion | |
Total assets: | $1000 billion | Liabilitiesplus+shareholder's equity: | $1,000 billion | |
After | Assets | Liabilities and Shareholder's Equity | ||
Reserves: | $____ billion | Deposits and otherliabilities: | $____ billion | |
Bonds and otherinvestments: | $_____ billion | Shareholder's equity: | $_____ billion | |
Total assets: | $_____ billion | Liabilitiesplus+shareholder's equity: | $_____ billion |
Complete the following table showing the balance sheet of the Fed before and after this sale.
Balance sheet of the Fed
Before | Assets | Liabilities and Shareholder's Equity | ||
Treasury bonds: | $2,000 billion | Reserves: | $2,000 billion | |
Other bonds: | $1000 billion | Currency: | $1,000 billion | |
Total assets: | $3,000 billion | Total liabilities: | $3,000 billion | |
After | Assets | Liabilities and Shareholder's Equity | ||
Treasury bonds: | $____ billion | Reserves: | $_____ billion | |
Other bonds: | $_____ billion | Currency: | $_____ billion | |
Total assets: | $_____ billion | Total liabilities: | $_____ billion |
If the demand deposits of Barclays' customers equaled $850 billion before the open market sale, and the reserve requirement was 10 percent of these deposits, Barclays > (held/ did not hold) > excess reserves with the Fed.
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