Total reserves Securities Loans Total assets Assets (in Billions) Total reserves S Instructions: In part a, enter your response as a percentage rounded to one decimal place. For all other parts, enter your responses as a whole number. a. What is the reserve requirement? 10 % Securities Loans Total assets b. Suppose the reserve requirement is changed to 8 percent. Reconstruct the balance sheet of the total banking system after all banks have fully utilized their lending capacity. $50 Transactions account deposits $100 $350 $500 Total liabilities $ $ $ Total reserves Securition Loans Total assets Assets (in Billions) billion 50 Transactions account deposits $500 Liabilities (in Billions) $ 100 350 500 Total liabilities $500 $ c. By how much has the money supply changed as a result of the lower reserve requirement (part b)? $ 125 billion d. Suppose the Fed now buys $20 billion of securities directly from the banks. What will the banks' books look like immediately after this purchase but before the banks make any additional loans? Total liabilities $ 825 Liabilities (in Billions) Transactions S account deposits 625 625 625 e. How much excess reserves do the banks have now? $ By how much can the money supply now increase due to this open market purchase? billion

Instructions: In part a, enter your response as a percentage rounded to one decimal place. For all other parts, enter your responses as a whole numbet a. What is the reserve requirement? b. Suppose the reserve requirement is changed to 8 percent. Reconstruct the baiance sheet of the total beriking system after ail banks have fully vallized their lending capscity. c. By how much has the money supply changed as a result of the lower-reservo requirement (part bj? d. Suppose the Fed now buys $20 bilion of securties directy from the bonks. What wil the banks' books look like hmmediotely atter this purchase but before the benks make any additional foans? e. How much excess reserves do the banks hove now? bilion C. By how much can the money supply now increase due to this open market purchese? $ bition