Question
T-accounts for the FED and for all commercial banks are given below. The FED | All commercial Banks Assets | Liabilities + Equity| Assets |Liabilities+
T-accounts for the FED and for all commercial banks are given below.
The FED | All commercial Banks
Assets | Liabilities + Equity| Assets |Liabilities+ Equity
Securities 200 | Currency 100 | Reserves 20 | Deposits 150
Loans to banks 100| Reserves 20 | Loans 175 |Loans from fed 100
| Equity ?? | Securities 125 | Equity ??
a. Determine the values of equity at the FED and all commercial banks.
b. If the required reserve ratio is rr = 0.10, what are excess reserves?
c. In the T-accounts below, show the immediate effects (ignore the long-term multiplier effects) of an open market sale of bonds by the FED to commercial banks in the amount of 10.
The FED | All commercial Banks
Assets | Liabilities + Equity| Assets |Liabilities+ Equity
Securities | Currency | Reserves | Deposits
Loans to banks |Reserves | Loans |]Loans from FED
| Equity | Securities | Equity
d. Briefly explain whether or not commercial banks are meeting their reserve requirement.
e. In the T-accounts below, show the long-term multiplier effects of the open market sale of bonds described in part c.
The FED
Assets | Liabilities + Equity| Assets |Liabilities+ Equity
Securities | Currency | Reserves | Deposits
Loans to banks 1 | Reserves | Loans |Loans from fed
| Equity | Securities | Equity
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