se solve the following parts as its a continuation a) Populate the following “T-accounts” with the following data $100 million in mortgage-backed securities (MBS) $200 million demand deposits $20 million in reserves held by banks $100 million in Treasury securities held by banks $50 million in Treasury securities held by the Fed $5 million in overnight borrowing by banks from the Fed b) Suppose that there is widespread default in mortgages. The market has frozen and the MBS are now worth nothing. The Fed has decided to prop up the banking sector by purchasing $80mil of MBS (non-traditional OMOs). Show all respective changes on the balance sheets and
QUESTION #3
please solve the following parts as its a continuation
a) Populate the following “T-accounts” with the following data
$100 million in mortgage-backed securities (MBS)
$200 million demand deposits
$20 million in reserves held by banks
$100 million in Treasury securities held by banks
$50 million in Treasury securities held by the Fed
$5 million in overnight borrowing by banks from the Fed
b) Suppose that there is widespread default in mortgages. The market has frozen and the MBS are now worth nothing. The Fed has decided to prop up the banking sector by purchasing $80mil of MBS (non-traditional OMOs). Show all respective changes on the balance sheets and highlight in yellow.
Households Banks Federal Reserve Firms
___A_______L___ ___A_______L___ ___A_____L___ ___A_____L___
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