Question
Use T-accounts to show the initial effect of the following changes on the balance sheets of the Federal Reserve and BB&T, a private commercial bank.
Use T-accounts to show the initial effect of the following changes on the balance sheets of the Federal Reserve and BB&T, a private commercial bank. Here, I want you to ignore the secondary effects that the following actions have on the entire banking system via multiple deposit expansion.
(a) The Fed purchases $2 million worth of Treasury securities from BB&T in the open market.
(b) The Fed extends a discount loan to BB&T in the amount of $2 million.
(c) The Fed extends a discount loan to BB&T in the amount of $2 million. Meanwhile, depositors at BB&T withdraw $1 million of deposits to hold in the form of currency. Assume that BB&T does not hold any vault cash, so all of its reserves are held in the form of reserve balances at the Fed.
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