National Bank currently has $350 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is decreasing this requirement to 6 percent. a. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 90 percent of its excess reserves to loans and borrowers return 70 percent of these funds to National Bank as transaction deposits.

National Bank currently has $350 million in transaction deposits on its balance sheet. The current reserve requirement is 8 percent, but the Federal Reserve is decreasing this requirement to 6 percent. a. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts all excess reserves to loans, but borrowers return only 50 percent of these funds to National Bank as transaction deposits. b. Show the balance sheet of the Federal Reserve and National Bank if National Bank converts 90 percent of its excess reserves to loans and borrowers return 70 percent of these funds to National Bank as transaction deposits.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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